Correlation ranges from -1 to 1 and measures the similarity of movement between two securities.
Traders should be mindful of diversification with regards to correlated assets when constructing their portfolio to reduce concentrated risk.
One way to diversify risk when trading multiple securities is to trade uncorrelated stocks. When domestic indices are, two options for diversification are the emerging market ETFs, EWZ (Brazil) and FXI (China).
These ETFs provide low price andcorrelations, which is useful for price diversification and reducing risk.
Tune in as Tom and Tony walk through some potential strategies for each of these products and if they prefer one over the other.