Glossary

Glossary

Term Book Chapter Definition
Correlation CFA Level 1 Exam Chapter 2: Quantitative Methods A statistical measure that shows the relationship between two variables. In the context of market returns, a positive correlation indicates that the variables move in the same direction, while a negative correlation means they move in opposite directions.
Correlation Corporate Finance Chapter 6: Risk and Return In the context of portfolio theory, correlation refers to the relationship between asset returns, which can range from -1 (perfectly inverse) to +1 (perfectly correlated). Including assets with low or negative correlation reduces overall portfolio risk.