Interdependence of returns across multiple strategies
Posted on Mon 03 March 2025 in Portfolio construction
When constructing a portfolio, it's common to see low pairwise correlations among strategies - say, around 0.2. However, this number may not fully capture the underlying dependency between strategies, especially when they're built to exploit similar market tendencies, such as intraday trends. In this article, I explore how strategies can be interdependent, and why relying solely on correlation can be misleading when assessing risk.
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