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Finance GlossaryNegative Correlation
Negative Correlation
Definition of Negative Correlation
Negative Correlation describes a relationship between two assets where they move in opposite directions. When one increases in value, the other tends to decrease. In finance, it is often used to reduce portfolio risk by combining assets that do not move together. An example is gold and equity market.
Related Terms
Price-to-Sales (P/S) Ratio
The Price-to-Sales (P/S) Ratio is a valuation metric that divides a company's current market capitalisation by its total sales or revenue of the last twelve months. It is used to gauge the amount investors are willing to pay for every rupee of a company's revenue. This ratio is useful when looking at companies that are not yet profitable or have volatile earnings, because revenue is often less volatile and less susceptible to accounting manipulations than earnings are. A lower P/S ratio is often thought to be more favorable.
Internal Rate Of Return
Internal Rate Of Return (IRR) is used to measure the compound annual return generated by a financial asset. IRR is a tool in Discounted Cash Flow financial analysis that operates by bringing the Net Present Value (NPV) of cash flow to zero. That’s why IRR can be used to compare a variety of financial assets from the equity market or bond market to real estate.
Hammer Candlestick Pattern
A Hammer Candlestick pattern occurs when a stock, commodity, or currency opens much lower than its previous closing price but moves close to or above the the same price at the close. The pattern looks like a hammer, hence the name “Hammer Candlestick”.
The candlestick can be read as follows:
The candlestick can be read as follows:
- The main body shows the difference between the financial security’s opening and closing price.
- The wick (shadow) of the candlestick shows the high and low prices of the security for the day.
Gravestone Doji
A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.
This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.
This is a price action type trading strategy that is formed with a tall upper shadow, which is a signal of a bearish reversal.
Margin Call
Margin call occurs when a brokerage firm requires the investor to deposit funds in their account or sell their securities in order to meet the minimum margin requirement in their account because the value of their leveraged investments has dropped below a required level. If market participants fail to do so, the broker forcibly closes the position to protect their loaned funds.
Red Herring Prospectus
A Red Herring Prospectus (RHP) is a preliminary offer document filed with SEBI when a company plans to go public through an IPO, outlining the company’s business, financials, risks, management, and most issue details. It does not include the final offer price or the exact number of shares being issued. It is marked with a bold red disclaimer indicating that certain key information like price and share count is incomplete or subject to change, and it helps investors assess the company before subscription. Once the offer price and share details are finalised (usually after book-building), the final prospectus with complete priced details is issued for public use.
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