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Understanding the difference between correlation and cointegration is critical if you intend to pair trade stocks. Not knowing the difference is a sure fire way to mount up losses in your account.

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Creating a profitable stock portfolio is not just about selecting the right stocks, it is about ensuring you understand how your positions relate to each other, how diversified your portfolio is and how exposed you are to different areas of the market. Correlation cluster charts give you the birds eye view needed to do this.

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Creating a well diversified, profitable stock portfolio takes more than simply selecting stocks from different Sectors. This article discusses the benefits of correctly diversifying your stock portfolio and what it takes to do so.