“It’s not the number of assets that determines diversification, it’s the correlation among them.” – Richard Bernstein Diversification through correlation analysis is another step in our efforts to lower volatility while maintaining a respectable return for the ITA portfolios. In the following example I’ve selected twenty-two (22) ETFs that are frequently used to populate the […]
Correlation Matrix of Critical ETFs
As requested in a comment, here is the correlation matrix of critical ETFs used in nearly all the ITA portfolios. I cut the time frame to 23 months of data so VSS and VNQI did not show up with “short-term” data errors. Identical percentages were assigned to each ETF with exception of SDS. The percentages […]
How to Construct a Portfolio
If you are relatively new to investing or if you have been building a portfolio by selecting individual stocks and find you are under performing the market and wish to switch to index investing, how does one construct a portfolio? Index investing is actually much easier and less stressful than stock picking. Here are the […]
Finding Low Correlated ETFs
In keeping with HedgeHunter’s recent “Cluster Weighting” presentation, finding low correlated ETFs to pair with equity ETFs is essential. The following correlation matrix shows a mixture of highly correlated securities along with modest and low correlated ETFs. Only SDS is negatively correlated and that is strictly due to it being a short ETF. In other […]
QPP Analysis
A Quantext Portfolio Planner (QPP) analysis was requested for the following ten securities. In the analysis the S&P 500 is projected to return an annualized 7.0% over the next six to twelve months. QPP Analysis: This array of 10 ETFs is projected to top the S&P 500 by 220 basis points annually. The projected standard […]
Portfolio Construction: The Essential Decisions
William J. Bernstein, in his most recent book, “The Investor’s Manifesto” writes, “Before diving into the most important issue faced by any investor–the asset allocation decision–you will need to understand four things: save as much as you can, make sure you have enough liquid taxable assets for emergencies, diversify widely, and do so with passive […]
How Many Assets Should I Hold In My Portfolio?
This question has been asked in a number of Blog Posts and we pussy-foot around it because there really is no definitive answer. On the one hand we need enough to give us an adequate level of diversification (whatever that means) to reduce volatility (risk) while keeping our commissions, management costs and fees to a […]
Portfolio Positions
The following is a table of the structure of the portfolios tracked here at ITA. Please react and let me know if this is helpful. The table is incomplete, but readers will pick up the idea. Note that the percentages assigned to the Schrodinger are actually asset class assignments rather than percentages invested in the […]
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