Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation January 2015.

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Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation January 2015

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation In the world of finance, a statistical measure of how two securities move in relation to each other. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. 2

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation Perfect positive correlation (a correlation co-efficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random. In real life, perfectly correlated securities are rare, rather you will find securities with some degree of correlation 3

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation Tables Correlation, or Covariance, Tables, provide data which feeds overall risk measurement of a portfolio of assets Mixing assets with low correlation will reduce risk Assets with high correlation will do little to reduce overall risk 4

Seminar: Timely Topics for Today’s Business World Mr. Bernstein 5 Correlation Matrix

Seminar: Timely Topics for Today’s Business World Mr. Bernstein 6 Correlations change over time

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Correlation among S&P 500 stocks over time 7

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Price Regression Hedge (PRH) – KO vs PEP 8

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Price Regression Hedge (PRH) – KO vs GOOG 9

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Price Regression Hedge (PRH) – KO vs Bond ETF 10

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Graph Ratio (GR) 11

Seminar: Timely Topics for Today’s Business World Mr. Bernstein Spread Graph Price (SGP) 12