The Ten Commandments of Investing
Many Happy Returns
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Is Your Tree Static?
Romain Nikisa: The problem with correlation is let's say you've got 20 assets. What you end up with is a huge number of correlations. So that's why the tree is really useful, because it's a kind of low dimensional, simple way of visualizing something which is very high dimensional. Is this tree static then? Do the correlations just stay the same forever? No, they certainly don't. But again, if you're looking over the long term, you do have fairly stable correlations. It's just important to understand that it's not a static thing. If you're well diversified, but doesn't mean there won't be drawdowns. I'm out something
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