Decoupling

Reviewed by Vineeth | Updated on Aug 27, 2020

Introduction

Decoupling is defined as the returns of security deviating from its expected value or normal range of correlation with other securities.

Understanding Decoupling

In the field of investment, portfolio managers and investors utilise a statistical measure referred to as correlation to define the connection between two or more assets.

Factors to Consider

  1. Decoupling occurs when there is a deviation of the returns of an asset from the correlated assets.

  2. Decoupling refers to the variation between a country's investment performance from its underlying economy.

  3. Investors can sometimes consider decoupling as an excellent investment opportunity but there is no certainty in getting returns.