As traders we use correlations all the time, but what are some of the risks with them? Be sure to watch Tom and Tony go over risks in correlation!
- Diversify underlyings in our portfolio
- Diversify in our portfolio
- with multiple underlyings
- Understand how correlation changes in sell offs
- Pairs trade securities with strong negative or positive correlations
But with this heavy use of correlation, comes some risk:
- Correlation describes direction not magnitude
- Correlations are constantly changing
- Assets become more correlated in a selloff
Tune in to hear Tom and Tony break down these common correlation risks!