Hi again,

Sorry uh .... I had to go off just now to have some makan and tidor (sleep) for a while.

Now ... what nonsense am I supposed to state here to irritateyou and waste your time :unsure: :unsure: :unsure: .... O yes , now I remember ...about NEGATIVE CORRELATION right?

NEGATIVE CORRELATION can prove to be an advantage if we could apply it positively to the selection of stocks for our portfolio.
Let me give you an example : Sometimes we can buy two stocks such that when an economic situation affects one of the stocks negatively it would have the opposite effect on the other.

Wah, if can find pairs of stocks like that .. surely can sleep peacefully at night ( [color=red]uuugh ..... provided your bed partner is also on good ,loving terms with you before that la.)[/COLOR]

Say for example, if you are still the big time flour dealer and you divorce your baker wife and then marry a lady butcher or a lady green grocer just before the pests decide to destroy all grain crops ... wah your family income would not be hit or hit badly . See? Why? How?

Well, when we have no wheat or rice or any other grains to eat we would be forced to eat more meat or vegetables. So the butcher's or the green-grocer's sales and earnings would increase appreciably. People have to substitute meat/vegetables for the rice/ wheat.

Another example .. this time from one of my egg-head friends : Instead of buying 6 Utilities, we buy 3 Utility stocks and 3 energy stocks. If the price of fuel were to go up gains on the energy stocks would offset the losses on the Utilities (Cost of Utilities would rise .... people would cut down on their use on Utilities)

So it is in our interests if we buy assets that will balance each other and then adjust the amount of each that we hold to preserve this balance when the economic pressure(s) changes direction. .


Let me leave you in peace with your family now. I try not to be a pest to you. :D

Have a nice Sunday - and a profitable week ahead. :)

Ps:
SERIOUS NOTICE: I DO NOT ADVOCATE THE REPLACEMENT OF YOUR WIFE IN TANDEM WITH EACH ECONOMIC CHANGE. (SWEAR!) :rolleyes: