This is the first part of a video series …this one focused on diversification measurement, which I patented with Josh Ladd a couple years ago. it is the first thing i look after modeling a portfolio. Diversification = Dimensions….this video explains how and why.
This chart tells us that the portfolio being analyzed has a variance 60% captured in only one dimension. Minimizing the percentage of the portfolio captured in the first dimension is a routine output of our investment process and greatly reduces the susceptibility of the portfolio to system risk. We see good portfolio (made of ETF’s Mutual Funds, Asset Allocations Policies) will shed their first dimension in the 10-15% range
the more you have effectively sourced diversification into the portfolio the less redzone you will see. A large redzone is an example of a portfolio that could look good in a mean-variance analysis but have poor True Diversification properties
Gsphere has the flexibility to compare any portfolio to any portfolio. You can compare the same portfolio over different time periods, various versions of the same holdings optimized with different settings or contrast a prospect’s holdings to a recommended model. Whenever looking at a client facing comparison, it is critical to make those comparisons apples…
Better Investment managers employ more edges. I took a look at our process and found 14 edges we use in models right now
This is from my second patent where we measure diversification as a dimension using the Karhunen – Loeve Dimension (KLD). It is essential part of our portfolio evaluation
Can anyone out there think of a contradiction to this apparent explanation of any and all paradoxes? A paradox occurs when the context of the answer to a question is supposed in a dimensionality of the solution space that is less that required.
USA GDP: 14.7 trillion USA Cumulative Deficit: 14.3 Trillion Percentage of GDP usurped (taxed) by Government at all levels: 27% US Government corporation equivalent revenue = 3.86 Trillion (.27 * GDP) The median valuation multiplier of the S& P 500 index is 1.74 X revenue Implied valuation for the Unites States based on large cap…
The strong contango in the futures market for the VIX is not expected to relent in the next six months. In my analysis by holding the VXX will result in an annual loss of 60 – 70% given unchanged levels of volatility in the ^VIX. Despite the advantages we see in holding the VIX (great…
Quantitative Easing Explained