Great post. This might help with portfolio allocation. The challenge in portfolio allocation is that correlation is often a living thing. Many assets are perfectly uncorrelated until a stock market crash hits, and exactly when you need the uncorrelation, they become correlated. This is not an argument against portfolio diversification, just highlighting how complex that topic is. Maybe research like this helps.
Spot on. Correlation is important, however, unlike volatility, it received less attention. But now as 60/40 portfolio suffered some setback, correlation modeling is attracting more attention.
Great post. This might help with portfolio allocation. The challenge in portfolio allocation is that correlation is often a living thing. Many assets are perfectly uncorrelated until a stock market crash hits, and exactly when you need the uncorrelation, they become correlated. This is not an argument against portfolio diversification, just highlighting how complex that topic is. Maybe research like this helps.
Spot on. Correlation is important, however, unlike volatility, it received less attention. But now as 60/40 portfolio suffered some setback, correlation modeling is attracting more attention.
https://harbourfrontquant.substack.com/p/what-caused-the-increase-in-correlation
Another great paper!! Thanks for sharing!!