00:00Correlation is the measure of how much two things are connected.
00:05It's measured from zero to one, and the goal with investing is to diversify enough
00:09so that your portfolio has a correlation of zero or negative.
00:13If you invested in a watch, for example, that you thought would do well, like this Rolex,
00:18but you also bought another watch that you thought would do well,
00:20like this God-tier red G-Shock to diversify,
00:23the correlation between these two watches is technically close to one.
00:27Because even though they are two very different watches, they both belong to the same asset class.
00:31So whatever happens to the watch world, both of them will be affected at the same time to different degrees,
00:36which is why the standard advice has always been to buy not just stocks,
00:39buy some bonds, some real estate, some crypto, maybe gold, some art, some alternatives.
00:45That way you can smooth out your ride and not give yourself a heart attack on the roller coaster of 100% stocks.
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