An equitable relationship?
Are hedge funds overly correlated with equities, and is correlation the whole story? Greenwich Alternative Investments' Margaret Gilbert investigates
Correlation is one of the most useful statistics to measure how asset risks are interrelated. By definition, correlation measures the direction and the timing of returns - basically, how closely two or more investments' returns move together. Diversification by correlation helps prevent investment portfolio components from all marching in unison. The idea behind correlation is that when one investment zigs (that is, yields a negative return), you want the other to zag (that is, yield a positive
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