Recoupling

AAA

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.

INVESTOPEDIA EXPLAINS '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. Contagion

    The likelihood that significant economic changes in one country ...
  2. Correlation Coefficient

    A measure that determines the degree to which two variable's ...
  3. Decoupling

    The occurrence of returns on asset classes diverging from their ...
  4. Correlation

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

    1. A resource with economic value that an individual, corporation ...
  6. Cape Cod Method

    A method used to calculate loss reserves that uses weights proportional ...
RELATED FAQS
  1. What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world ... Read Full Answer >>
  2. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  3. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  4. What is the risk return tradeoff for bonds?

    Macaulay duration and modified duration are mainly used to calculate the durations of bonds. The Macaulay duration calculates ... Read Full Answer >>
  5. What is the formula for calculating the capital to risk weight assets ratio for a ...

    Use the Macaulay duration to calculate the duration of a zero-coupon bond. The resulting Macaulay duration of a zero-coupon ... Read Full Answer >>
  6. How do I calculate how long it takes an investment to double (AKA 'The Rule of 72') ...

    You can calculate the approximate amount of years it would take an investment to double, given the annual expected rate of ... Read Full Answer >>
Related Articles
  1. Forex Education

    Making Sense Of The EUR/CHF Relationship

    The strong correlation between EUR and CHF currency pairs is undeniable. Find out what it means for forex traders.
  2. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.
  3. Investing

    How To Implement A Smart Beta Investing Strategy

    Smart beta investing is the notion of re-writing investment rules to improve investment outcomes by targeting exposures to intuitive ideas or factors.
  4. Investing

    Market Crisis: Does Diversification Still Work?

    If you still aren’t sold on the benefits of international diversification, you may object that: Diversification didn’t work during the last market crisis.
  5. Economics

    Explaining the Value Chain

    A model of how businesses receive raw materials as input, add value to the raw materials, and sell finished products to customers.
  6. Fundamental Analysis

    Explaining Variance

    Variance is a measurement of the spread between numbers in a data set.
  7. Investing Basics

    Understanding Risk-Return Tradeoff

    The essence of risk-return tradeoff is embodied in the common phrase “no risk, no reward.”
  8. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  9. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  10. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.

You May Also Like

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. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center