Jul

1

A good text to learn the study of changes in correlation is Pitfalls in Tests for Changes in Correlations.

Ralph Vince adds:

Maybe not related to what you are after, but the metric of correlation, however calculated (raw, rank, etc) is good for examining predictability in indicators and markets, along with lead/lag times.

But I strongly caution against using it as an input in relative allocations (what some call portfolio construction). When using it, people are holding it by the blade not the handle, and tend to not know it.
 


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