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Trading glossary · risk

correlation

How much two prices tend to move together. If they always rise and fall together, owning both is like one bigger bet.

The fuller meaning

A measure from +1 (always together) to −1 (always opposite) of how two price series move. Highly correlated positions, such as two large coins or two banks in one country, tend to win and lose together, so they are counted as one bet when adding up open risk.

correlation, also called correlated.

Related words

1% rule · ATR stop · average loss · average win · breakeven · breakeven win rate · daily loss limit · drawdown · equity curve · exposure