By Bill Acheson via Iris.xyz
If you subscribe to the bearish view and believe a correction is coming in stocks, you are probably in a bit of a quandary about what to do about it: do you get out of the market completely or get even more aggressive and short some stocks that have big run-ups in price?
I would suggest there is another strategy you can apply to your portfolio that can give you more peace of mind than the nearly impossible task of timing the market: correlation.
Correlation, the concept of two or more things moving together, is a great way to balance your portfolio in a time of uncertainty.
Correlation is important for the simple reason that all investments do not act the same all the time. While some go up, others go down, depending on economic conditions, the industries they are in and other factors.
Of course, everyone loves a bull market when it seems that anything you buy is going up but it’s a lot less fun when bears take over and the same thing is happening on the downside.
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