what does inverse correlation tell you 
inverse correlation tells you that when one variable is high the other tends to be low correlation analysis can reveal useful information about the relationship between two variables such as how the stock and bond markets often move in opposite directions the correlation coefficient is often used in a predictive manner to estimate metrics like the risk reduction benefits of portfolio diversification and other important data if the returns on two different assets are negatively correlated then they can balance each other out if included in the same portfolio in financial markets a well known example of an inverse correlation is probably the one between the u s dollar and gold as the u s dollar depreciates against major currencies the dollar price of gold is generally observed to rise and as the u s dollar appreciates gold declines in price 1limitations of using inverse correlationtwo points need to be kept in mind with regard to a negative correlation first the existence of a negative correlation or positive correlation for that matter does not necessarily imply a causal relationship even though two variables have a very strong inverse correlation this result by itself does not demonstrate a cause and effect relationship between the two second when dealing with time series data such as most financial data the relationship between two variables is not static and can change over time this means the variables may display an inverse correlation during some periods and a positive correlation during others because of this using the results of correlation analysis to extrapolate the same conclusion to future data carries a high degree of risk 