Correlation Matrix Stress Testing: Shrinkage Toward an Equicorrelation Matrix
Financial research has consistently shown that correlations between assets tend to increase during crises and tend to decrease during recoveries1. The recen...
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Residualization of Risk Factors: Examples and Pitfalls
The most common approach to measuring portfolio (risk) factor exposures is linear regression analysis, which describes the relationship between a dependent ...
Replicating the J.P. Morgan Efficiente Index
The J.P. Morgan Efficiente 5 Index is a tactical asset allocation strategy designed by J.P. Morgan based on a broad universe of 13 ETFs. This post will illu...
Crypto-assets portfolio optimization and trade order creation with Google Sheets
Crypto-assets (Bitcoin, Ethereum…) have recently been attracting the attention of more and more investors, with for example JPMorgan Chase & Co. suggesti...
When a Correlation Matrix is not a Correlation Matrix: The Nearest Correlation Matrix Problem
Estimating how individual assets are moving together is an important part of many financial applications1 and the most commonly used measure for this is the...