Portfolio Correlation

4 replies

Marcel

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6 years ago #217774

Dear together,

 

what you think how much is acceptable the correlation in a portfolio.

 

In the moment i accept everythin under 0,70.

 

What is your meaning?

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tomas262

Administrator, sq-ultimate, 2 replies.

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6 years ago #217787

Hello,

we published more on this topic https://docs.strategyquant.com/portfolio-correlation-explained

If two instrument are having 0.7 correlation it seems quite a lot given usually long enough backtest history. The value should be as close to 0 as possible

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mabi

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6 years ago #217791

Also there is different periods to consider, daily, hour and different ways to calculate correlation, opentrades or closed trades etc. SQ3 produced a lot of strategies that will take similar entries  but their exits can vary and because of that they seems uncorrelated but their impact on the Eq curve smoothness can be greatly negative or positive in comparison to other strategies performance. I would suggest  that if the strategy is not (- ) correlated you divide the size they trade between how many of the same instrument you have in the portfolio that is until you seen how they do in live trading then your EQ curve will be smoother guaranteed. Correlation between different instruments will always be less important then correlation on the same instrument no matter what strategy you have.

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Marcel

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6 years ago #217800

Thanks for response!

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hankeys

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6 years ago #217802

In my portfolios i want to achieve monthly correlation of profit/loss max to 0.3

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