Why Two 'Different' Investments Can Still Move Together
Correlation, and why true diversification requires more than just owning different tickers.
Correlation measures how closely two assets move relative to each other. Assets can appear different (different tickers, sectors, even asset classes) while still being highly correlated due to shared underlying drivers.
During broad market stress, correlations across many asset classes often rise together — a phenomenon sometimes summarized as 'in a crisis, all correlations go to one.' This is a key limitation of diversification during systemic events.
Building genuinely diversified exposure means examining actual historical correlation data, not just asset labels, and periodically re-checking those relationships as they can shift over time.
This guide is general education for informational purposes only and does not constitute personalized investment advice from Veridian.