How to Use Correlations to Build a Portfolio

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The thing about correlations is that it's very noisy data. What we are most interested for the purpose of portfolio construction is the long-term basis for correlation or lack there of. It does not necessarily surprise me that you do get some differentiation in these numbers, particularly if you're comparing something like real estate or commodities funds.

In this episode we answer two emails from Alexi (a/k/a the "Dude") and another from Barry. We discuss funds that are designed to take advantage of rising interest rates like RRH, RISR and PFIX, another Dude-constructed accumulation portfolio with leveraged funds and some portfolio construction rules of thumb, and the noisy-ness of correlation data and matrices.

And THEN we our go through our weekly portfolio reviews of the seven sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

PFIX Webpage and Resources: PFIX Simplify Interest Rate Hedge ETF | Simplify

The Dude's New Portfolio Constructions compared with S&P500: Backtest Portfolio Asset Allocation (portfoliovisualizer.com)

Portfolio Visualizer Correlation Tool: Asset Correlations (portfoliovisualizer.com)

Bogleheads Post about Morningstar Correlation Data: Morningstar Correlation Matrix - Bogleheads.org

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