The Connections of Your Investment Portfolio Holdings

For decades financial experts have advised that investors hold securities that will balance or correlate to each other in their market actions. 

In the classic example: You hold common stock and corporate bonds. When stocks are hit for some reason, you can assume the market for the bonds will be strong, to countervail any damage. And the reverse markets can occur; when bonds get hit, the stocks will rise.

But there are other measures of correlation as well. For example, domestic and foreign stock markets or emerging markets.

However, so-called correlation doesn’t work that way in real life. Oftentimes, stocks and bonds move in unison. as do the movements of international and domestic securities. (See the Earl J. Weinreb NewsHole® comments.)