Recoupling

DEFINITION of 'Recoupling'

When returns on asset classes revert back to their historical or traditional patterns of correlation. This is in contrast to decoupling, which occurs when asset classes break away from their traditional correlations. Recoupling occurs after a period in which the asset classes have been generating a return that shows little correlation.

BREAKING DOWN 'Recoupling'

Recoupling and decoupling revolve around the idea that there is a correlation between asset classes based on fundamental factors, like trade relationships when referring to economies. For a true decoupling to occur, there needs to be the removal or weakening of the fundamentals behind the relationship.

RELATED TERMS
  1. Decoupling

    The occurrence of returns on asset classes diverging from their ...
  2. Multiple Capital Structure

    The classification of a company's stock and bond offerings into ...
  3. Multi-Asset Class

    A combination of asset classes (such as cash, equity or bonds) ...
  4. Share Class

    A designation applied to a specified type of security such as ...
  5. Class Of Shares

    1. Types of listed company stock that are differentiated by the ...
  6. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
Related Articles
  1. Personal Finance

    Diversification: It's All About (Asset) Class

    Frustrated stock pickers rejoice - asset class selection is simpler and safer.
  2. Investing

    Correlation

    In the world of finance, correlation is a statistical measure of how two securities move in relation to each other.
  3. Forex Education

    How To Trade Currency And Commodity Correlations

    Relationships between currencies and commodities exist throughout the financial markets. Find out how to trade these trends.
  4. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  5. Personal Finance

    Could Higher Correlations Wreck Your Diversification Strategy?

    Rising asset correlations could make your portfolio riskier than you think.
  6. Economics

    Understanding the Oil & Gas Price Correlation

    Learn how the correlation between the commodity prices for natural gas and oil changed from 2004 to 2015 due to increased natural gas production.
  7. Investing Basics

    What is an Asset Class?

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
  8. Investing Basics

    Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio risk.
  9. Trading Strategies

    Is the Stock Correlation Strategy Effective?

    The synchronized movement among stocks and markets in recent years is challenging diversification.
  10. Investing Basics

    Diversification: Protecting Portfolios From Mass Destruction

    This investing strategy retains its charm as a protection against random events in the market.
RELATED FAQS
  1. How do fund managers use correlation to create portfolio diversity?

    Read about how contemporary investment fund managers use the concept of correlation to add diversification among assets in ... Read Answer >>
  2. What is the difference between a copay and a deductible?

    Learn how the correlation coefficient may be used to predict the relationship between the returns of two stocks, but also ... Read Answer >>
  3. Can the correlation coefficient be used to measure dependence?

    Understand the coefficient of correlation and its use in determining the relationship between two variables through the concepts ... Read Answer >>
  4. What types of assets lower portfolio variance?

    Learn what type of assets reduce portfolio variance and how modern portfolio theory uses correlation coefficients. Read Answer >>
  5. What are common examples of Serial Correlation in finance?

    Take a deeper look at serial correlation in finance, and find out why most attempts at discovering serial correlation among ... Read Answer >>
  6. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center