RT Journal Article
SR Electronic
T1 Correlation vs. Trends in Portfolio Management:<br/>
               <em>A Common Misinterpretation</em>
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 63
OP 66
DO 10.3905/jwm.2012.15.3.063
VO 15
IS 3
A1 Francois-Serge Lhabitant
YR 2012
UL https://pm-research.com/content/15/3/63.abstract
AB Two common beliefs in finance are that i) a high positive correlation signals assets moving in the same direction while a high negative correlation signals assets moving in opposite directions; and ii) the mantra for diversification is to hold assets that are not highly correlated. The author explains why both beliefs are not only factually incorrect, but can actually result in large losses in what are perceived to be well-diversified portfolios.TOPICS: Portfolio construction, statistical methods, risk management