Stock Market CorrelationsThere are a lot of stock market correlations. Nearly all stocks in one industry group behave the same. When the dollar falls gold should go up. The list goes on, but these correlations are not to be taken with 100% accuracy.
There will be plenty of times when two securities that normally trade in opposite directions from each other will be trading in the same direction. You should not go out and buy a bond during a bear market just because they typically do better in a bears market. They need to be treated just like a trade. Is the bond trending down with the market? If it is why buy it. That would be like going after the lesser of the two losses. Instead of just assuming the correlation will always work you should take the time to find out if it actually is a good trade. Stock market correlations are good just don’t overemphasize them.
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