When, say, two types of asset were assumed to be uncorrelated, investors felt able to hold the same capital as a cushion against losses on both, because they would not lose on both at the same time.
And, of course, skilled money managers are worth their high fees if they can consistently provide uncorrelated alpha to their investors, although these excess returns generally come at the expense of someone else.
Often derived from a quirk in the environment or in public policy, they affect the outcome (a person's earnings, say, to return to the original example) only through their influence on the input variable (in this case, the number of years of schooling) while at the same time being uncorrelated with what is left out (scholastic ability).
Pooling works when the risks of each loan are uncorrelated.
Commodities diversify portfolios: in theory, at least, price moves are uncorrelated to shares and bonds.
The investments furthest up the risk curve are the ones, naturally, whose prices are likely to fall most sharply.So 2015 will also see a flowering of investments billed as "uncorrelated" with bond and share prices.
Moreover, many clients, having been persuaded of the benefits of diversification in recent years, had bought alternative assets, such as hedge funds and private equity, which supposedly offered absolute (positive) returns uncorrelated with the stockmarket.
Those higher valuations have duly led to lower returns.Another rationale for the move into alternative assets (as hedge funds and private equity are known) is that returns are uncorrelated with those on other assets.
The idea they helped develop in the 1970s and 1980s deemed eccentric at the time was to break the portfolio into a mix of standard and "alternative" assets, as uncorrelated with each other as possible so as to spread risk.
Uncorrelated hedge funds tend to have niche strategies and there is a limit to the amount they can invest.
"They started from the other end entirely, asking how can we create CDOs, backed by mortgage-backed securities, themselves backed by collateral with barely any history, and their stress tests assumed house prices would be stable and the loans in the pools uncorrelated," says Mr Borod.Encouragingly, credit-card receivables are still being bundled and sold.
