DEFINITION of 'Diversified Carry Basket'

A forex trading strategy in which multiple carry trades are conducted simultaneously in order to limit risk. A diversified carry basket uses diversification to reduce exposure to a particular currency position, and can include both major currencies as well as more exotic ones.

BREAKING DOWN 'Diversified Carry Basket'

Just as an investor managing a portfolio of securities will take positions in different industries and sectors, forex traders can diversify their holdings by investing in several different currency pairs. It is also important to determine the relationship and potential correlation between currencies before investing because the correlation among pairs will affect the degree of diversification in the basket.

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