Correlation Calculator - Asset Correlation & Portfolio Risk

Correlation measures how closely two assets move together. A correlation of +1 means perfect positive correlation, -1 means perfect negative correlation, and 0 means no correlation. This helps traders understand portfolio diversification and risk.

Correlation ranges from -1 to +1. Values above 0.7 indicate strong positive correlation, 0.3-0.7 moderate correlation, -0.3 to 0.3 weak correlation, and below -0.7 strong negative correlation. Higher absolute values mean stronger relationships.

Understanding correlations helps build diversified portfolios. Assets with low or negative correlations can reduce overall portfolio risk since they don't move in the same direction simultaneously, providing better risk-adjusted returns.

Generally, at least 30 data points are recommended for reliable correlation analysis. More data points (50-100+) provide more robust results, but ensure the time period is relevant to current market conditions.

Yes, correlations are dynamic and change with market conditions. During market stress, assets typically become more correlated (moving together). Economic events, policy changes, and market cycles can significantly alter correlation patterns over time.

Common highly correlated pairs include: EUR/USD and GBP/USD (both affected by USD strength), oil stocks and crude oil prices, gold and mining stocks, and tech stocks during market trends. Use our calculator to verify current correlations before making portfolio decisions.

Use returns (default) for accurate correlation analysis. Correlating raw prices can create spurious correlations from trending data (non-stationary series). Log returns are statistically sound, time-additive, and recommended by quants. Only use prices if you specifically need to analyze the relationship between price levels.