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Tom and Tony discuss how correlation risk can negatively impact our positions in a market that is selling off.

In severe market selloffs, correlations of equities converge towards 1. In all other markets, correlations can be anywhere from -1 to 1.

This means that diversification in equities is virtually non-exisitant when the market sells off.

To combat this, try putting positions in other asset classes that hold their non-correlation better in market selloffs than equities.

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