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Tony Robbins Exclusive: Holy Grail of Investing – Chapter 1

The Tony Robbins Podcast

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Diversification and Correlation in Portfolios

Traditional portfolios aim to reduce risk and maximize upside through diversification, but many traditional investments are correlated, meaning they move up or down in unison. Correlation measures how much investments move together, and varying degrees of correlation exist. For example, stocks and bonds are generally uncorrelated, providing some protection when stocks go down. However, correlations are always changing and can lead to unexpected outcomes. In 2022, stocks and bonds both dropped simultaneously, leading to no projection or diversification. AQR, a successful algorithmically driven hedge fund, believes that macroeconomic changes may continue to disrupt traditional diversification strategies.

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