What is a 'Benchmark For Correlation Values'
Benchmark for correlation values is a term that refers to a benchmark, or specific point of reference, that an investment fund uses to measure important correlation values such as beta, which measures the volatility of a security to the market as a whole, or Rsquared, a statistical measure that shows how much of the variance for a dependent variable can be explained by an independent variable.
BREAKING DOWN 'Benchmark For Correlation Values'
Benchmark correlation values are important, as they indicate the degree to which a given fund's performance is related to its market, using the benchmark as a proxy for the market. For instance, a high correlation to a fund's benchmark is generally considered to be favorable for the fund if their investment thesis closely follows the benchmark.
A benchmark for correlation values depends on the investment mandate of a particular fund. For example, a largecap U.S. equity fund would probably use the S&P 500 as its benchmark for correlation values, while a largecap Canadian equity fund might use the S&P/TSX Composite Index as its benchmark.
A correlation coefficient is a statistic that measures how strong the relationship is between two variables.
If the ranges of values is between 1.0 and 1.0, a correlation of 1.0 shows a perfect negative correlation; a correlation of 1.0 shows a perfect positive correlation. A correlation of 0.0 shows zero or no relationship between the movement of the two variables.
Why a Benchmark For Correlation Values is Important
An awareness of how your investments correlate is important to knowing how to manage a particular portfolio's risk. If too many of your investments are highly correlated, if one of them takes a downturn, many others or all of them will too.
Correlation is based on the relationship between the prices of different assets. It measures how likely the price of two assets are to moved together, and does so on a of 1 to 1. For example, if two assets both have a correlation of 1, then they are positively correlated and will moved in the save direction, up or down, at all times. Assets with negative correlation, a value of 1, move in opposite directions at all time. Assets with a correlation of 0 move in the same direction 50 percent of the time.
As a rule of thumb, it's generally considered to be prudent for assets to have a correlation range between 0.5 and around 0.5, though actual will numbers will vary depending on an investor's risk tolerance. For example, risk averse investors will want as little correlation as possible.

Correlation Coefficient
The correlation coefficient is a statistical measure that calculates ... 
Benchmark
A benchmark is a standard against which the performance of a ... 
Benchmark Error
Benchmark error occurs when an inappropriate benchmark is used ... 
Negative Correlation
A perfect negative correlation is a relationship between two ... 
Serial Correlation
Serial correlation is the relationship between a given variable ... 
Risk Measures
Risk measures give investors an idea of the volatility of a fund ...

Investing
What's the Correlation Coefficient?
The correlation coefficient is a measure of how closely two variables move in relation to one another. If one variable goes up by a certain amount, the correlation coefficient indicates which ... 
Financial Advisor
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. 
Insights
Prices of Stocks and Bonds Move More in Tandem
Correlation between stock and bond prices in the U.S. have reached a 10year high, reversing a broader trend of negative correlation. 
Investing
How To Trade Currency And Commodity Correlations
Relationships between currencies and commodities exist throughout the financial markets. Find out how to trade these trends. 
Trading
Using Currency Correlations To Your Advantage
Knowing the relationships between pairs can help control risk exposure and maximize profits. 
Investing
PRHSX: Risk Statistics of Health Sciences Mutual Fund
Examine the risk metric of the T. Rowe Price Health Sciences Fund. Analyze beta, capture ratios and standard deviation to assess volatility and systematic risk. 
Investing
Financial Ratios Every Investor Should Know
Explore the risk metrics of mutual fund DODFX. Learn how beta, Rsquared, capture ratios and standard deviation measure systematic and volatility risk. 
Investing
Understanding Quantitative Analysis Of Hedge Funds
Analyzing hedge fund performance quantitatively requires metrics such as absolute and relative returns, risk measurement, and benchmark performance ratios. 
Investing
Behind United Airline's 91.6% Rise in 10 Years (UAL)
United Continental's stock has been impacted by oil prices and economic cycles, but its statistical correlation to the market has been very low.

What does it mean if the correlation coefficient is positive, negative, or zero?
When a coefficient is greater than zero, it is a positive relationship; when the value is less than zero, it is a negative ... Read Answer >> 
How is correlation used in modern portfolio theory?
Discover how modern portfolio theory and the efficient frontier use correlation between investment assets to predict an optimal ... Read Answer >> 
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 >> 
What's the difference between Rsquared and correlation?
Discover how Rsquared calculations determine the practical usefulness of beta and alpha correlations between individual ... Read Answer >> 
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 >>