What is a good investment metric to reward diversification within a portfolio. Suppose we have a fixed income universe and prefer stable currency, mid yield and mid tenors. Our stressed spread var covar matrix suggests that we have correlation factor amongst each currency & fixed income class.
A simple metric would be weighted-portfolio for correlation Possibly the HHI Herfindahl index weights
This is in the context of Solvency II but would apply much more broadly. Any suggestions or solutions?