An extract from my book, Quantitative Research and Trading, to be published in 2017.

Home Archive by Category "Correlation"

JonathanCointegration, Correlation, Dickey-Fuller, Pairs Trading, Phillips-Perron, Spread Trading, Statistical ArbitrageNo commentsCointegration, CVX, Dickey-Fuller, Oil Stocks, Pairs Trading, Phillips-Perron, Statistical Arbitrage, XOM

An extract from my book, Quantitative Research and Trading, to be published in 2017.

JonathanCopulas, Correlation, Mathematica, Mean Reversion, Pairs Trading, Statistical Arbitrage1 commentCopulas, Nasdaq, Pairs Trading, S&P 500, Statistical Arbitrage

Introduction In a previous post, Copulas in Risk Management, I covered in detail the theory and applications of copulas in the area of risk management, pointing out the potential benefits of the approach and how it could be used to improve estimates of Value-at-Risk by incorporating important empirical features of asset processes, such as asymmetric…

JonathanCopulas, Correlation, Dispersion, Fat Tails, Index, Mathematica, Quantitative finance conference Derman Dupire forecasting volatility, Risk Management, S&P500 Index, Tail Risk, Value at RiskClayton, Copulas, Correlation, Frank, Gumbel, Kendall's Tau, Mathematica, Multivariate Distributions, Spearman's Rho, Tail Risk, Value at Risk, VaR

Copulas in Risk Managment

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JonathanConvexity, Correlation, Factor Risk, Higher Moments, Multifactor Models, Risk Management, S&P500 Index, Strategy Robustness, Tail Risk, VIX Index, VIX Index, Volatility, Volatility ETF Strategy, Volatility ModelingConvexity, Correlation, Factor Risk, Kurtosis, Leveraged ETFs, MultiFactor Models, Sem--deviation, Skewness, Sortino, Tail Risk, Volatility

As markets continue to make new highs against a backdrop of ever diminishing participation and trading volume, investors have legitimate reasons for being concerned about prospects for the remainder of 2016 and beyond, even without consideration to the myriad of economic and geopolitical risks that now confront the US and global economies. Against that backdrop,…

JonathanCointegration, Correlation, Portfolio Management, Statistical ArbitrageCointegration, Correlation, Equity Portfolios

The use of correlations is widespread in investment management theory and practice, from the construction of portfolios to the design of hedge trades to statistical arbitrage strategies. A common difficulty encountered in all of these applications is the variation in correlation: assets that at one time appear to be suitably uncorrelated for hedging purposes, may…

JonathanCorrelation, Efficient Frontier, Mean Variance Optimization, Portfolio Management, S&P500 IndexAverage Correlation, Efficient Frontier, Mean variance optimization, Modern Portfolio Theory, Robustness, Sharpe Ratio

Summary In this article, I am going to look at how stock portfolios should be constructed that best meet investment objectives. The theoretical and practical difficulties of the widely adopted Modern Portfolio Theory approach limits its usefulness as a tool for portfolio construction. MPT portfolios typically produce disappointing out-of-sample results, and will often underperform a…

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