Cluster portfolios using return correlation

January 07, 2011

Motivation You might already know that diversifying your investment over uncorrelated assets is a good way to reduce risk. That’s why people watch asset return correlation closely so they can make informed decision in portfolio construction. Correlation is important not only in identifying diversification opportunities but also in understanding investment strategies’ characteristics so that we… Read more

Using Cumulative Sums to Analyze Financial Data

December 21, 2010

The goal of modeling is to be able to describe and predict the behavior of a system. When modeling systems where the general form of the model is unknown, one must usually begin by looking at data to get a sense for the relationship between model performance and potentially explanatory variables. Analyzing financial data is… Read more