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On stock correlation and portfolio diversification
I'm still learning about portfolio construction, and I've been reading a lot about the importance of non-correlated assets for diversification. But how do you really identify assets that are truly uncorrelated, especially in highly volatile or sector-wide event driven markets? Is it more about sector spread, market cap, or looking at something else entirely?
1 comments · 1 points
That's a good question. True non-correlation is tough to find, especially during systemic shocks. Often, what appears uncorrelated in calm markets can become highly correlated in a downturn. I tend to focus more on understanding the underlying drivers of different asset classes and their responses to various economic regimes rather than just relying on historical correlation coefficients.