Continuing Education! 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.

The history should be at least 4 years and the asset should have a positive return. If that is fulfilled, next criteria is correlation.

Thanks jcl. Could you elaborate/explain why 4 (years) is the number? Phrased another way, why isn't 3 (years) enough?

Thanks.

Hi jcl. Sorry if this is documented somewhere and I missed it. A rephrasing and a further clarification question:

- How was it determined that 4 is the number? Is it based on statistical evidence reported somewhere? Is it your "Rule of Thumb" based on experience? Some other derivation?

- How exact is the 4? I.e., today is 2022-09-27. Does that mean the Asset's history must start no later than 2018-09-27? Or does the partial 2022 not count and history should start no later than 2018-01-01? Or is it a rounding thing and History can start as late as 2019-01-01?

Thanks!

"Rule of thumb" probably describes it best.

OK. Thanks @jcl!