The singular value decomposition (SVD) based on the Hankel matrix is commonly used in signal processing and fault diagnosis. The noise reduction performance of SVD based on the Hankel matrix is affected by three factors: the reconstruction component(s), the structure of the Hankel matrix, and the point number of the analysis data. In this article, the three influencing factors are systematically studied, and a method based on correlated SVD (C-SVD) is proposed and successfully applied to bearing fault diagnosis. First, perform SVD analysis on the collected original signal. Then, the reconstructed component(s) determination method of SVD based on the combination of singular value ratio (SVR) and correlation coefficient is proposed. Then, based on the SVR, using the envelope kurtosis as the indicator, the optimal structure of the Hankel matrix (number of rows and columns) is studied. Then, the number of data points of the analysis signal is discussed, and the constraint range is given. Finally, the envelope power spectrum analysis is performed on the reconstructed signal to extract the fault features. The proposed C-SVD method is compared with the existing typical methods and applied to the simulated signal and the actual bearing fault signal, and its superiority is verified.