What is a stock correlation matrix?

A stock correlation matrix shows the statistical relationship between pairs of stocks. Values range from -1 (perfect negative correlation) to +1 (perfect positive correlation). A value near 0 means the stocks move independently. Our matrix uses factor-based correlation, measuring how similar stocks are in terms of quality, value, momentum, and other fundamental scores.

How is factor correlation different from price correlation?

Price correlation measures how stock prices move together over time. Factor correlation measures how similar stocks are in terms of fundamental characteristics like quality scores, value metrics, and momentum. Factor correlation helps you understand if two stocks share similar investment profiles, regardless of short-term price movements.

How can I use correlation for portfolio diversification?

To build a diversified portfolio, look for stocks with low or negative correlation. If two stocks have a correlation near 0 or below, they behave differently under various market conditions, reducing overall portfolio risk. Avoid holding multiple stocks with very high correlation (above 0.7) as they offer less diversification benefit.

What factors are used to calculate the correlation?

The correlation is calculated using seven factor scores: quality score, value score, momentum score, investment score, stability score, short interest score, and composite score. These scores capture the fundamental characteristics of each stock across multiple dimensions.

Resources

Stock Correlation Matrix

Compare how similar stocks are based on fundamental factor scores. Enter up to 20 tickers to generate a factor-based correlation matrix for portfolio diversification analysis.

Enter up to 20 tickers (comma or newline separated)

Ctrl+Enter to calculate

Quick Presets

Click a preset to load tickers, then click Calculate

Understanding Stock Correlation

Stock correlation measures the statistical relationship between two securities. A correlation coefficient of +1 indicates perfect positive correlation (the stocks move in the same direction), -1 indicates perfect negative correlation (they move in opposite directions), and 0 indicates no linear relationship.

Our correlation matrix uses factor-based correlation, which measures how similar stocks are across fundamental dimensions including quality, value, momentum, investment efficiency, stability, and short interest. This approach reveals structural similarities between companies that pure price correlation may miss.

What You'll Get From This Tool

Diversification Score — A single 0-100 rating of how diversified your stock selection is, based on average pairwise correlation.
Key Insights — Auto-generated plain-English analysis identifying clusters, hedges, and concentrated positions in your selections.
Pair Analysis — The most and least correlated pairs are highlighted so you can quickly identify which stocks provide the most (and least) diversification benefit.
Preset Portfolios — One-click examples to see what well-diversified vs concentrated portfolios look like.

Portfolio Diversification Rules of Thumb

Above 0.7: High overlap — holding both stocks provides minimal additional diversification.
0.3 to 0.7: Moderate overlap — some shared characteristics but enough differences for partial diversification.
Below 0.3: Low correlation — these stocks move independently and offer strong diversification benefit.
Negative values: Natural hedge — opposite factor profiles mean one may rise when the other falls.

Understanding Stock Correlation

What You'll Get From This Tool

Diversification Score — A single 0-100 rating of how diversified your stock selection is, based on average pairwise correlation.
Key Insights — Auto-generated plain-English analysis identifying clusters, hedges, and concentrated positions in your selections.
Pair Analysis — The most and least correlated pairs are highlighted so you can quickly identify which stocks provide the most (and least) diversification benefit.
Preset Portfolios — One-click examples to see what well-diversified vs concentrated portfolios look like.

Portfolio Diversification Rules of Thumb

Above 0.7: High overlap — holding both stocks provides minimal additional diversification.
0.3 to 0.7: Moderate overlap — some shared characteristics but enough differences for partial diversification.
Below 0.3: Low correlation — these stocks move independently and offer strong diversification benefit.
Negative values: Natural hedge — opposite factor profiles mean one may rise when the other falls.