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.