The Facebook IPO and the trading activity at JP Morgan have dominated headlines recently. However, there is a quiet force at work behind the scenes that may have a much greater impact on long-term investment returns than Mark Zuckerberg's net worth or the fate of Jamie Dimon.
For the last 20 years, the correlation between asset classes has been steadily rising. Correlation measures how two assets move in relation to each other. Correlations range between -1 and +1. A correlation of -1 indicates a perfect negative correlation; that two assets move in completely opposite directions. A correlation of +1 indicates a perfect positive correlation; that assets move together in the same direction. A correlation of 0 indicates that no relationship exists between the two assets and the movement of one has no impact on the movement of the other. Full Article
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