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Z8, Z9 - History Length vs. Correlation #486541
09/03/22 23:36
09/03/22 23:36
Joined: Jun 2013
Posts: 1,593
D
DdlV Offline OP
Serious User
DdlV  Offline OP
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Joined: Jun 2013
Posts: 1,593
Continuing Education! laugh I'll ask this question in terms of Z8 & Z9 where it applies, but presumably it also applies in other contexts.

For Assets Correlation, the desire is to have more "blue" = less Correlation.

Suppose a group of Assets A which is more "blue", less Correlated, than a different group of Assets B.

However, there is more History available for Assets B.

Does one prefer B due to the longer History and presumably therefore more reliable "blue"ness?

Or does A win since the Assets are less correlated?

Or should one restrict the B History to A's length to compare apples to apples?

Or is there some Rule of Thumb for trading off History Length vs. Correlation?

Thanks.

Re: Z8, Z9 - History Length vs. Correlation [Re: DdlV] #486699
09/19/22 13:45
09/19/22 13:45
Joined: Jul 2000
Posts: 27,892
Frankfurt
jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,892
Frankfurt
The history should be at least 4 years and the asset should have a positive return. If that is fulfilled, next criteria is correlation.

Re: Z8, Z9 - History Length vs. Correlation [Re: DdlV] #486705
09/19/22 22:12
09/19/22 22:12
Joined: Jun 2013
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DdlV Offline OP
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DdlV  Offline OP
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Joined: Jun 2013
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Thanks jcl. Could you elaborate/explain why 4 (years) is the number? Phrased another way, why isn't 3 (years) enough?

Thanks.


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