as hedging or trading, which cannot be achieved through the individual constituents or even subsets of them. Multiple … procedures have been proposed to compute hedging and trading baskets, among which balanced baskets have attracted significant …

eigen-structure of the sample correlation matrix. This paper compares the filtering methods using a theoretical eigen … are identified. The sample correlation matrix suffers from excess dispersion in its eigenvalues and excess dispersion in … the sample covariance matrix, its diagonal elements and the covariance matrix based on the constant correlation model …

dynamic leverage mechanism. The correlation-adjusted variant outperforms the naive implementation of the strategy and the …

’s other assets, but correlation is useful only if it provides a good estimate of how an asset’s returns co-occur cumulatively … with the other asset returns over the investor’s prospective horizon. And because correlation is an average of sub …

We solve for the optimal portfolio allocation in a setting where both conditional correlation and theclustering of … when dynamic conditional correlation has been accounted for, andvice versa. Both effects have distinct portfolio … implications and cannot substitute each other. We alsoisolate the hedging demands due to macroeconomic and market conditions that …