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.
[7] Stock market corrections are typically measured retrospectively from recent highs to their lowest closing price.
[citation needed] 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.