Decoupling of Marketsĭecoupling can also occur to markets and economies. In this vein, if investors allocate their investment in diversified portfolios, if the value of one investment falls, the other does not have to follow the trend.
Usually, in investments, investors and portfolio managers choose diversified portfolio which entails that investments or assets do not have correlating behaviours. In this situation, one class of asset increases while another decreases as against their regular previous pattern. When correlated assets or investments begin to exhibit different behaviors contrary to their pattern of correlation, decoupling has occurred. When assets fall and decline together, they are correlated. Back to: INVESTMENTS & TRADING How Does Decoupling Work?Ĭorrelation is a measure used in the investment market to determine the mutual relationship between two or more assets. Different classes of assets that usually move (fall or rise) together but begin to behave in different patterns have been decoupled. In this situation, one can notice one class of the asset rises in price while the declines. For instance, if two classes of assets increase and decline together but at a time they begin to exhibit diverging behaviours contrary to what they are known for, decoupling has occurred. When different assets classes that exhibit certain similar behaviours behave contrary to their normal correlations or patterns, decoupling has occurred.
#DECOUPLING INVENTORY DEFINITION UPDATE#
Update Table of Contents What is Decoupling? How Does Decoupling Work? Decoupling of Markets What is Decoupling?ĭecoupling refers to a situation in which security prices or returns on asset behave differently from the expected pattern.
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