Q3: Jonathan Larkin – Seeking Alpha? Try MORE Alpha Factors
Chat With Traders
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The Magic of Combining Multiple Factors
Delani: What considerations need to be made when thinking about the correlation between multiple factors. Delani: I look for um a high, uh high sharp ratio. The sharp ratio is the ratio of the return of a strategy to the volatility of a strategy. When you add up factors that have low correlation You know, you get the magical effect and significantly enhanced risk return on the combination. delani: If two factors are very correlated with each other they're not going to explain anything new.
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