Correction_(stock_market)

Market correction

Market correction

New equilibrium price of a commodity

A market correction is a rapid change in the nominal price of a commodity, after a barrier to free trade has been removed and the free market establishes a new equilibrium price. It may also refer to several such single-commodity corrections en masse, as a collective effect over several markets concurrently.[1][2][3]

Stock market correction

Stock market correlation refers to the statistical relationship or connection between the price movements of different stocks or financial instruments.[4]

A stock market correction refers to a 10% pullback in the value of a stock index.[5][6] Corrections end once stocks attain new highs.[7] Stock market corrections are typically measured retrospectively from recent highs to their lowest closing price. The recovery period can be measured from the lowest closing price to new highs, to recovery.[8] Gains of 10% from the low is an alternative definition of the exit of a correction.[citation needed]

Declines of 20% or more are classified as a bear market.

Understanding stock market correlation is vital for investors and traders as it can provide insights into portfolio diversification, risk management, and asset allocation. By analyzing correlations, investors can assess the potential impact of market movements on their overall portfolio, identify opportunities for hedging or reducing risk, and make informed decisions based on the interplay between different stocks or sectors.

See also

References

  1. [1]
    "Market Correction: What Does It Mean?". Schwab Brokerage. January 25, 2022. Retrieved July 5, 2022.
  2. [2]
    "The Data Point: What's a stock market correction?". NBC News. January 25, 2022. Retrieved July 5, 2022.
  3. [3]
    "Europe faces 'severe' risk of disorderly financial market correction: Lagarde". Reuters. June 20, 2022. Retrieved July 5, 2022.
  4. [4]
    Campbell, Elizabeth Aldrich, Tessa. "What is a stock market correction? How to make sense of sudden drops in the market". Business Insider. Retrieved 2023-06-22.{{cite web}}: CS1 maint: multiple names: authors list (link)
  5. [5]
    Hicks, Coryanne (2018-02-05). "What Is a Stock Market Correction?". U.S. News. Retrieved 2020-03-18.
  6. [6]
    "What Is a Stock Market Correction?". The New York Times. 2020-02-27. ISSN 0362-4331. Retrieved 2020-03-18.
  7. [7]
    DeCambre, Mark. "Stop saying the Dow is moving in and out of correction! That is not how stock-market moves work". MarketWatch. Retrieved 2020-03-18.
  8. [8]
    "Stock Market Corrections: Not As Scary As You Think". Wealthfront Blog. 2018-05-11. Retrieved 2020-03-18.


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