Comments on: Correlation: What is it and Why Should Investors Care? http://www.jimkopas.com/archives/124 Wealth Management Professional at Pring Turner Capital Sat, 02 Jan 2010 00:46:24 +0000 hourly 1 http://wordpress.org/?v=3.0 By: New Stock Market Guide - No Competition On CB! - Huge Market. | 7Wins.eu http://www.jimkopas.com/archives/124/comment-page-1#comment-270 New Stock Market Guide - No Competition On CB! - Huge Market. | 7Wins.eu Tue, 17 Nov 2009 16:08:01 +0000 http://www.jimkopas.com/?p=124#comment-270 [...] Conference 2007: Panel session: Business models and sustainability : Digitisation Examining America’s Growing Government Dependence | You Decide PoliticsCorrelation: What is it and Why Should Investors Care? | Jim Kopas [...] [...] Conference 2007: Panel session: Business models and sustainability : Digitisation Examining America’s Growing Government Dependence | You Decide PoliticsCorrelation: What is it and Why Should Investors Care? | Jim Kopas [...]

]]> By: Paul Escobar http://www.jimkopas.com/archives/124/comment-page-1#comment-32 Paul Escobar Fri, 02 Oct 2009 14:53:30 +0000 http://www.jimkopas.com/?p=124#comment-32 <a href="#comment-29" rel="nofollow">@Paul Charbonnet </a> Paul: It should be pretty easy. In fact there's a series of studies, done by Wilshire, i think, which shows tht the biggest reason that institutional investors outperform retail investors is becasue of periodic rebalancing. And, even without regard to forward looking strategies. If all one does is rebalance periodically to an objective/policy allocation, the volatility works for you and you buy low and sell high, which is the real beauty of covariance/variance, or correlations. @Paul Charbonnet

Paul:
It should be pretty easy.

In fact there’s a series of studies, done by Wilshire, i think, which shows tht the biggest reason that institutional investors outperform retail investors is becasue of periodic rebalancing. And, even without regard to forward looking strategies. If all one does is rebalance periodically to an objective/policy allocation, the volatility works for you and you buy low and sell high, which is the real beauty of covariance/variance, or correlations.

]]> By: Sanjay Kumar Thakur http://www.jimkopas.com/archives/124/comment-page-1#comment-31 Sanjay Kumar Thakur Fri, 02 Oct 2009 12:34:46 +0000 http://www.jimkopas.com/?p=124#comment-31 Hi, Thanks for this lucidly written article on co-relation. After this global financial crisis, "co-relation" has got some attention from the investors,investment managers and regulators alike.I would like to add few issues which need to be kept in the mind when using co-relation on portfolio decision making: (i) Stability of co-relation co-efficient: One may see from your example of S&P 500 and GSCI that co-relation co-efficient is not Constant and may vary (in value and/or in direction) as well. (ii) Unco-related mean no linear co-relation. There still may be co-relation of higher order. The model generally used in majority of softwares to measure co-relation is "Pearson's co-relation" which tells about "Linear Co-relation" only. (iii)Finding a non-co-related asset class is highly unlikely for a general investor and not so easy task for even the big investment firms. Everyone understand age-old statement " Dont keep all eggs in one basket" but issue is to find really "non co-related" baskets otherwise keeping eggs in even 10 (co-related) baskets wont help. Hi,
Thanks for this lucidly written article on co-relation. After this global financial crisis, “co-relation” has got some attention from the investors,investment managers and regulators alike.I would like to add few issues which need to be kept in the mind when using co-relation on portfolio decision making:
(i) Stability of co-relation co-efficient: One may see from your example of S&P 500 and GSCI that co-relation co-efficient is not Constant and may vary (in value and/or in direction) as well.
(ii) Unco-related mean no linear co-relation. There still may be co-relation of higher order. The model generally used in majority of softwares to measure co-relation is “Pearson’s co-relation” which tells about “Linear Co-relation” only.
(iii)Finding a non-co-related asset class is highly unlikely for a general investor and not so easy task for even the big investment firms. Everyone understand age-old statement ” Dont keep all eggs in one basket” but issue is to find really “non co-related” baskets otherwise keeping eggs in even 10 (co-related) baskets wont help.

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