How to Analyze Correlations in Your Portfolio

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The best way to analyze correlations is to use a correlation analyzer that allows you to just input whatever you have. When the correlation number between two funds or assets is close to positive one, that means the assets are correlated. Golden commodities are near zero; they are basically uncorrelated with stocks and bonds. Cash and short-term bonds are also near zero. Reets and preferred shares and many other things, master-limited partnerships.

In this episode we discuss how professionals construct risk-parity style portfolios, what are the basic principles for the do-it-yourself investor, and how to implement them. The three basic principles are (1) the Holy Grail Principle; (2) the Macro-Allocation Principle; and (3) the Simplicity Principle.

Here are the links mentioned in the episode:

March draw-downs for professional risk-parity style portfolios: https://www.markovprocesses.com/blog/risk-parity-funds-in-the-coronavirus-market-rout/

Ray Dalio explains the Holy Grail principle of risk-parity style investing: https://www.youtube.com/watch?v=Nu4lHaSh7D4

Ray Dalio reveals the most basic components of most risk-parity style portfolios:
https://www.youtube.com/watch?v=KA7U8xT_2Dk

Portfolio Visualizer Asset Correlation Calculator: https://www.portfoliovisualizer.com/asset-correlations

Portfolio Charts Master Portfolio Analyzer: https://portfoliocharts.com/portfolios/

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