Invest on the edges to avoid contagion, research suggests

Loosely connected assets are better protected against market crashes

business networks

Network analysis has been growing in popularity in risk modelling, but recent research suggests it may be useful in investment strategy as well.

By picking assets that are at the periphery of a correlation network, the research claims a portfolio is less likely to suffer from contagion during a downturn or market upheaval. Avoiding "interconnectedness risk" in this way outperforms benchmarks and conventional active strategies in terms of risk-adjusted return, in particular during downturns

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: