Bearish Outlook
A bearish outlook means a trader believes an asset’s price will decline.
Bullish Stance
A bullish stance on an asset means a trader believes its price will appreciate over time.
Correlation Coefficient
The Pearson correlation coefficient is the most common metric for measuring correlation, expressed by a coefficient ranging from +1 to -1.
Correlation
Correlation refers to the relationship between multiple open positions, where holding several highly correlated assets can effectively increase your overall portfolio risk.
Divisor
A divisor in a price-weighted index is adjusted over time to account for corporate actions like stock splits, dividends, or changes in the index’s constituents, ensuring continuity in the index’s value.
Equal Weighting
Every stock within an equally weighted index holds the same significance, regardless of its market cap or share price.
Exchange Rate Risk
Exchange rate risk is the most substantial risk where if the high-interest-rate currency depreciates against the low-interest-rate currency, the capital loss from the exchange rate movement can easily outweigh the interest earned.
Fear Index
The “Fear Index” is a nickname for the VIX, reflecting its role as a gauge where higher values typically indicate increased investor anxiety and a greater expectation of market instability.
Fundamentally Weighted Indexes
Fundamentally weighted indexes base component weighting on fundamental metrics like earnings, dividends, sales, or book value.
High Liquidity
The ability to easily convert an asset into cash without significantly impacting its market price is vital for a safe haven.