What is the proper economic terms for values that move in opposite directions to one another. For example, stock and bonds, interest rates and prices etc. I thought perhaps “inverse values”. But I’m sure there’s a better term/expression.
I look forward to your feedback
davidmich
Inversely proportional?
“Inversely correlated”, or “negatively correlated”. The usage is not confined to economics. For example, blood alcohol levels and reaction times are inversely correlated.
Thank you all
davidmich
A general term would be inversely or negatively related. Negatively correlated has a more precise meaning that the correlation between two things is negative. The correlation between x and y is E[(x-E)(y-E[y])]/sqrt(E[(x-E)[sup]2[/sup]]E[(y-E[y])[sup]2[/sup]]).
Inversely proportional has the more precise meaning that y = k/x for some k, and note that if k < 0 then, x and y would increase together rather than y decreasing as x increases. Conversely if y = kx and k is negative, y is proportional not inversely proportional to x even though they are negatively related. You might say “negatively proportional”, but I don’t recall ever hearing that used.
If y never increases when x increases, you can say that “y is (weakly) decreasing in x”. If y always decreases when x increases, you can say that “y is strictly decreasing in x”. You can also say monotonically decreasing.
In my experience it’s called 'What you think the markets will do and what they actually do. YMMV.
‘Negatively correlated’, again in my experience, does not usually (in editorials) mean a -1 correlation. For example, historically as stock markets have risen the price of gold has fallen but the two are not exactly correlated by any means, but they might be termed as such. The same goes for ‘Inversely proportional’ when used in the press. ‘Having an inverse relationship’ would allow for more wiggle room.
Are you getting at the concept of a hedge?