Questions tagged [correlation-matrix]
The correlation-matrix tag has no usage guidance.
12 questions with no upvoted or accepted answers
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Cleaning correlation matrix, Bun Bouchaud Potters (2016) method
Stock returns correlation matrices are notoriously hard to estimate, especially when the number of assets $N$ is large with respect to the size of the readily available historical returns $T$. Many ...
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Rolling window Kendall's tau against APARCH(1,1) correlation
Assume you want to forecast the correlation matrix of a stocks' basket (say 15 ~ 20 stocks from different sectors); assume you need to forecast at $T$ days because you will use the forecast ouput with ...
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Barra covariance matrix construction
I am trying to replicate the covariance matrix used by Barra risk models.
All Barra models have half life parameters for volatilities and correlations (e.g. if the half life for volatlity is 90 days, ...
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Interpretation of Correlation Matrix
I have past data which is in vector form. The information shows the probabilities of a AAA rated company to migrate to another credit rating. So for example, (x1, x2, x3) has the probabilities of ...
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Neglect the positive values in negative interest rates modelling?
The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads.
Could their volatility / correlation coefficients,...
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Can the covariance matrix be represented as a scalar or something similarly small, instead of a large pair-wise grid?
The covariance matrix tabulates pair-wise interactions between variables (assets) one-at-a-time into a grid, which can quickly become large as the number of assets included in a portfolio, for example,...
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Minimum Subset within Correlation Matrix
I have a correlation matrix that I produced in Excel using the monthly returns from 200 different trading systems over a X year period. So, the correlation matrix is 200 rows by 200 columns. How do ...
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modeling regime switching for Correlation matrix
I am trying to estimate covariance in multiple time series. However, I want to do this using a regime-switching framework. So, I start with fitting a GARCH(1,1) model and then de-volatalize the series....
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Effect of kernel smoothing on correlation
Instead of deriving correlation matrix on standardized returns (z scores) would it not be more accurate to kernel smooth the cdf and then norminv the cdf values for the return z score and then ...
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Interpreting factor coefficients when correlation flips
I am looking at mainly value and growth factor coefficients of a fund during the recent Covid market “crisis”.
I have found that said fund had a negative coefficient to value at the start of 2020 (let’...
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Covariance of Individual Return and Portfolio Return
Hi guys,
Is it possible to get the covariance between the individual return and portfolio return given the correlation matrix, volatility matrix, weights matrix and return matrix?
I know how to get ...
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Calculation of break-even correlation for diversification effect in N-assets case?
I'm thinking about a generalization of the following case: for 2 assets, there is a diversification effect as soon as i obtain a positive weight for the minimum-variance portfolio in the asset with ...
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