Daily Archives: May 23, 2019 at 08:49 am EDT

Alternatives To Correlation For Quantifying Diversification

Diversification is famously described as the only free lunch in investing and so it’s no surprise that modeling, analyzing and otherwise dissecting the concept is a core part of portfolio design and management. The correlation coefficient is often the go-to metric in this corner of finance. But like any one statistical measure, there are pros and cons with correlation and so relying on it exclusively can be misleading at times. Fortunately, there are alternatives.

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Macro Briefing: 23 May 2019

Trump rules out working with Dems on infrastructure legislation: WSJ
Pessimism rising for outlook re: US-China trade conflict: Bloomberg
US Navy sails through Taiwan Strait, again: Reuters
PMI: Eurozone growth remains subdued in May: IHS Markit
British prime minister reportedly ready to resign: CNBC
Fed minutes: no rate changes on the horizon: CNBC
Vanguard issues new 10yr return forecasts for US stocks (4%-6%): philly.com
5-year Treasury inflation forecast falls to four-month low — 1.68%: