For a symmetric correlation matrix, the Inverse Correlation Matrix table contains the inverse of the correlation matrix, as shown in Figure 40.14. The diagonal elements of the inverse correlation ...

Harry Markowitz famously quipped that diversification is the only free lunch in investing. What he did not say is that this is only true if correlations are known and stable over time. Markowitz’s ...

Jason Fernando is a professional investor and writer who enjoys tackling and communicating complex business and financial problems. David Kindness is a Certified Public Accountant (CPA) and an expert ...

A principal component analysis of a correlation matrix treats all variables as equally important. A principal component analysis of a covariance matrix gives more weight to variables with larger ...

Leslie Kramer is a writer for Institutional Investor, correspondent for CNBC, journalist for Investopedia, and managing editor for Markets Group. Correlation measures the linear relationship between ...

The correlation matrix is of vital importance for value-at-risk (VAR) models in the financial industry. Risk managers are often interested in stressing a subset of market factors within large-scale ...

Random Matrix Theory (RMT) has emerged as an indispensable framework for understanding the statistical properties of matrices whose entries are determined by probabilistic processes. Initially ...