Overlapping Correlation Coefficient

ETH Risk Center – Working Paper Series ETH-RC-13-004

12 Pages Posted: 10 Jan 2014

See all articles by Paolo Tasca

Paolo Tasca

UCL Centre for Blockchain Technologies

Date Written: September 24, 2013

Abstract

This paper provides a mapping from portfolio risk diversification into the pairwise correlation between portfolios. In a finite market of uncorrelated assets, portfolio risk is reduced by increasing diversification. However, higher the diversification level, the greater is the overlap between portfolios. The overlap, in turn, leads to greater correlation between portfolios.

JEL Classification: C02, G11

Suggested Citation

Tasca, Paolo, Overlapping Correlation Coefficient (September 24, 2013). ETH Risk Center – Working Paper Series ETH-RC-13-004. Available at SSRN: https://ssrn.com/abstract=2376367 or http://dx.doi.org/10.2139/ssrn.2376367

Paolo Tasca (Contact Author)

UCL Centre for Blockchain Technologies ( email )

Gower Street
London, WC1E 6BT
United Kingdom

HOME PAGE: http://paolotasca.com

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