We would like to know what risk we are running in our portfolio which consists of a clutch of hedge funds. To do this we measure the individual volatilities of each hedge fund. We also need to know how these funds relate to one another.
Question: Do we measure the correlation of returns of each fund with another? Or should we find out what each fund has in its portfolio and measure the relationships between portfolio components?
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1 comment:
hi always thought it makes more sense to see correlation with the underlying portfolio but since that is not always possible people tend to calculation correlation of different managers to each other.
what do you prefer?
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