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. Intermarket Analysis

    The analysis of more than one related asset class or financial ...
  3. Correlation

    In the world of finance, a statistical measure of how two securities ...
  4. Asset Class

    A group of securities that exhibit similar characteristics, behave ...
  5. Inverse Correlation

    A contrary relationship between two variables such that they ...
  6. Negative Correlation

    A relationship between two variables in which one variable increases ...
Related Articles
  1. Products and Investments

    4 Reasons Why Market Correlation Matters

    Learn about how correlation can be used to measure how broader markets move in relation to each other. See how correlation is used to manage risk.
  2. Investing

    Correlation

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

    Pairs Trading: Correlation

    Correlation is a term from linear regression analysis that describes the strength of the relationship between a dependent variable and an independent variable. Central to pairs trading is the ...
  4. 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.
  5. 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.
  6. 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.
  7. Trading Strategies

    Is the Stock Correlation Strategy Effective?

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

    Diversification: Protecting Portfolios From Mass Destruction

    This investing strategy retains its charm as a protection against random events in the market.
  9. Trading Strategies

    How to Create a Risk Parity Portfolio

    Learn about how risk parity uses leverage to create equal exposure to risk among different asset classes in portfolio construction.
  10. Mutual Funds & ETFs

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular investment for retirement. Here's how to choose the best share class when investing in them.
RELATED FAQS
  1. How do I find positive correlation in the stock market?

    Learn how positive correlation is found in the stock market, how correlation is calculated and how positive correlation is ... Read Answer >>
  2. 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 >>
  3. Does a negative correlation between two stocks mean anything?

    Learn what the concept of negative correlation means, understand how it is generally calculated and see how it is used in ... Read Answer >>
  4. 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 >>
  5. What level of correlation among investments will guarantee market returns but have ...

    Learn how modern portfolio theory uses correlation to determine the efficient frontier for which assets to include in a portfolio ... Read Answer >>
  6. What is the difference between positive correlation and inverse correlation?

    Learn the difference between a positive correlation and a negative, or inverse, correlation and the way they apply to the ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center