correlation/uncorrelation
The extent to which multiple risk profiles move in relation to each other.
Correlated risk profiles move in concert when affected by the same set of stimuli.
For example, there is substantial correlation between the Dow Jones Industrial
Average (DJIA) and the Standard & Poor's (S&P) 500 Index because both are affected
by the same factors. In contrast, uncorrelated risk profiles (e.g., a book of
ocean marine business and a book of products liability coverage) react to entirely
different stimuli. The combination of uncorrelated risk profiles results in
lower combined volatility. See also Covariance.