Sector Correlation

What does this tell me? Each number shows how closely two sectors move together. +1.0 = they always rise and fall together. 0 = they move independently. −1.0 = when one goes up, the other goes down. What should I do with this? If two sectors you own have high correlation (0.7+), you are doubling down on the same bet. Consider whether you need both. To build a smoother ride, pair sectors with low correlation (below 0.5). When one dips, the other may hold steady. Example: Technology (XLK) and Utilities (XLU) often have low correlation — owning both spreads your risk better than owning two tech-like sectors. Remember: True diversification isn't just owning many sectors — it's owning sectors that don't all move together.
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