What is portfolio correlation and why does it matter?
Correlation measures how two return series move together, from −1 to +1. A value near +1 means closely related movement; near zero means little linear relationship; negative values mean opposite movement. Historical relationships can change.
Measured example
Yahoo adjusted-close monthly returns, dividends reinvested; 2007-05-01 to 2026-09-01, 232 common monthly returns. Nominal figures. Derived from preserved real observations by the shared calculation code at build time.
| Pair | Correlation |
|---|---|
| VTI / BND | 0.2595 |
For the illustrative mix (VTI 60.0%, BND 40.0%), monthly rebalancing produced historical CAGR 7.73%, volatility 10.22% and measured monthly maximum drawdown 32.20%. These are observations, not expected future results.
Correlation = covariance of monthly returns ÷ (standard deviation of each series). Fund-category overlap is qualitative; exact overlapping weights and shared holdings are not measured here.
Calculation details and worked exampleCheck your own holdings
For educational purposes only. Not investment advice. Past performance does not guarantee future results.