A measure of the volatility inherent in any risk-taking venture or activity.
Also indicates the manner in which two or more risk profiles react, when combined,
to create either greater or lesser overall volatility. If multiple risk profiles
are uncorrelated, lower overall volatility may result compared to the individual
risk profiles prior to the combination. For example, a book of high-excess property
insurance business is not correlated to a group of directors and officers
policies and would therefore produce lower overall volatility if an insurer
were to write both types of coverage. See also