One of the most disappointing aspects of the financial crisis, recession, and bear market of 2008 where stocks posted a peak-to-trough decline of just over 50%, was the fact that nearly all investments declined similarly. Diversification failed when it was most needed.
Correlation, the measure of how coordinated the movements among investments are, usually rises during downturns. Performance is often driven more by unique, asset-specific factors during upwardly sloping markets, but during a downturn investments are more likely to be driven by a sudden change in "big picture" factors common to all of them. The 2008 markets took this rise in correlation to a new extreme.
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