Risk warning on volatility and correlations

sine wave

It is well known that both volatility and correlation play a role in the riskiness of financial portfolios: higher volatility and/or higher correlations between investments both increase risk. Conversely, if either of these two drops, the portfolio risk also drops. From a return and risk perspective the current low correlation environment has been a boon to stock-pickers, as we pointed out in our November article. But such situations – when both volatility and correlations are in the low to

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