Correlation

A correlation of +1 means two assets move in lockstep — when one rises 1%, the other rises 1%. A correlation of −1 means they move in opposite directions with equal magnitude. A correlation near zero means their moves have little or no relationship. In practice, correlations sit somewhere in between and are rarely stable for long. You can observe cross-asset relationships by comparing data on the commodities, currencies, and stocks pages side by side.

Correlation is regime-dependent, meaning it can shift dramatically depending on market conditions. Gold and equities, for example, have historically shown low or even negative correlation during normal times — but during sudden liquidity crunches, correlations across almost all assets can spike toward +1 as investors sell whatever they can. This is sometimes called a "correlation breakdown," and it is one reason risk-on / risk-off episodes feel so disorienting.

Suppose (hypothetically) crude oil and the Canadian dollar have had a correlation of +0.75 over the past year — meaning they tend to move in the same direction most of the time, since Canada is a major oil exporter. Economists read this as the currency being sensitive to commodity revenues. That relationship could weaken or reverse if Canada's energy mix or trade patterns change significantly.

A frequent misreading: correlation does not imply causation. Two assets can be highly correlated for entirely unrelated reasons, or because both are reacting to a third factor — like global growth expectations. See also volatility and the guide What Moves Commodity Prices.