Applied Research

Factor Correlations Revisited: How a recent shift in market focus affected major factor correlations and portfolio risk

Author: Christoph V. Schon, CFA, CIPM, Executive Director, Applied Research

Since the middle of March this year, we have seen a shift in correlations between equity and foreign exchange risk factors. In this paper, we examine how changes in the correlations of major risk factor types, in particular the relationship between exchange rates and stock markets, affected a global, USD-denominated multi-asset class model portfolio

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