4min chapter

Flirting with Models cover image

Adam Butler - The "Ultimate Gift" (S1E1)

Flirting with Models

CHAPTER

Using Randomness to Boost Your Sharp Ratio

The mental model that I use for diversification is really like a 3D graph. It's using ensemble methods to extract a higher level of signal from the noise. What it does is it increases the ex-ante sharp ratio of the portfolio because you're not relying on any particular specification. You've just got more faith in the live trading of a portfolio if you've made very few decisions about how that portfolio should be formed.

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