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Unfortunately, when you need the benefits of diversification the most
- on those oddball, outlier days, are the times all correlations tend
to reduce to 1 !
If diversification is the only free lunch around, it is, imho, at
best, the blue plate sauerkraut special.
Quantity applied to trading, ESPECIALLY on the oddball, outlier days,
is FAR more inportant than diversification.
-Ralph Vince
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Date: Mon, 30 Mar 1998 06:56:09 -0800 (PST)
From: r v <rvince99@xxxxxxxxx>
Subject: Re: Diversification
To: PFein1503 <PFein1503@xxxxxxx>
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Unfortunately, when you need the benefits of diversification the most
- on those oddball, outlier days, are the times all correlations tend
to reduce to 1 !
If diversification is the only free lunch around, it is, imho, at
best, the blue plate sauerkraut special.
Quantity applied to trading, ESPECIALLY on the oddball, outlier days,
is FAR more inportant than diversification.
-Ralph Vince
---PFein1503 <PFein1503@xxxxxxx> wrote:
>
> Hi everybody,
>
> maybe someone on this list can provide some insight on a diversified
portfolio
> of commodities. From investment theory we know that holding a basket
of
> uncorrelated stocks/commodities is more efficient than holding a non-
> diversified basket of stocks/commodities. The risk-reward relation
is better.
>
> How can you apply that to your personal investment policy?
>
> Where does the effect of diversification start to decrease?
> Can I deworsify my portfolio at some point?
> Is trading 20 or 30 different commodities a well diversified approach?
>
> Or does the historical correlation between commodities provide a
better
> estimate of how much and what kind of commodities I should use?
> But when does an uncorrelated/correlated relationship between
futures break
> down?
>
> I appreciate all the comments on this subject
> Regards B.
>
>
>
>
>
>
>
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