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Nicholas Donohoe  

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  • Kill Your Beta To Save Your Alpha [View article]
    R-Squared in the single factor risk model is equal to the square of the correlation coefficient. If the relative volatility of your portfolio to the risk index is 1, then beta will be equal to correlation.
    Nov 25, 2013. 07:27 AM | Likes Like |Link to Comment
  • Kill Your Beta To Save Your Alpha [View article]
    Ideally you want to be using a multi-factor model and optimizer for portfolio construction, time-varying risk models for volatility forecasting, and a single factor risk model for hedging.
    Nov 25, 2013. 07:23 AM | Likes Like |Link to Comment
  • Kill Your Beta To Save Your Alpha [View article]
    Hi Bob,

    Thanks for reading and commenting.

    Some of my more active institutional clients used to closely monitor their beta exposure to control their systematic risk exposure and would adjust by trading SPX futures to match their market outlook; retail investors can do the exact same thing.

    I really like your comment about not having a directional bias and I don't think you are alone. You have inspired me to write an article on exactly that topic.

    Cheers,
    Nick
    Nov 24, 2013. 05:12 PM | Likes Like |Link to Comment
  • Kill Your Beta To Save Your Alpha [View article]
    A few people have asked what system I used for the optimizer and risk analytics. Everything was done in Stockbox (http://bit.ly/1bZ9a66) and all the images are screenshots.
    Nov 22, 2013. 08:30 PM | Likes Like |Link to Comment
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