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Gabriel,
Yes, I have done correlation studies and incorporated correlation
strategies. You might consider the market correlation rules in the Turtle
system as a practical starting point (www.originalturtles.com). These rules
address exposure risk limits within a portfolio, and block new positions
from being taken under different correlation levels. I can vouch that the
rules outlined by Curtis Faith do indeed boost performance quite a bit.
There's always the classic literature for correlation: Modern Portfolio
Theory (MPT) by Markowitz, and Capital Asset Pricing Theory (CAPT) by
Sharpe. Typically these are not system trader oriented. It would be nice to
see research done on correlating trading system returns among multiple
systems, or systems on multiple instruments. I note that of Ralph Vince
relates MPT to futures portfolio in Chapter 6 of Portfolio Management
Formulas. Vince always makes interesting reading if you like digesting
formulas (I'm assuming you do if you're asking about correlation :-)
Cheers,
Kevin
At 06:35 PM 1/27/2004 -0800, you wrote:
Hi All,
Has anyone done any work with, or have a strong opinion about,
correlations between commodities and/or correlations between strategies.
Has anyone read anything, measured the effect of, or optimized
portfolios so as to maximize negative correlation or construct the most
efficient portfolio. I am obviously very new to this so any advice would
be much appreciated.
Gabriel
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