Sat, Jun 25, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers December 2012

Peter Urbani' Statistics - Visualising dependence

Visualising dependence This month we look at the application of http:// en.wikipedia.org/wiki/Graph_(mathematics) graph theory to attempt to better visualise these connections. Our ultimate aim is, as always, to better understand the underlying dynamics and dependencies between assets in order to be able to better diversify our portfolios against the next crisis. In particular, we examine the use of http:// en.wikipedia.org/wiki/Partial_correlation Partial Correlation to help deepen our understanding of the co-relationships that exist and also to help filter out extraneous or spurious correlations. The Partial Correlation Matrix is calculated from the inverse matrix of either the standard Pearson product moment Correlation Matrix or the Variance- Co-Variance Matrix, preferably after ‘robustifying’ it through some or other form of shrinkage towards the global mean. In its univariate form, it can be thought of as the correlation of the residuals of X and Y after subtracting the returns of a third variable Z, from both. A Dependency matrix is then constructed by deducting the Partial Correlation from the Pearson Correlation to help identify those components with the highest level of interaction. It is hoped that the resulting matrix is more representative of the ‘true’ dependencies. The Dependency Matrix is then converted to an adjacency matrix, typically after further threshold filtering, and then to a Directed Adja......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Visium hedge fund manager Sanjay Valvani found dead[more]

    Benedicte Gravrand, Opalesque London: A hedge fund manager connected with an insider trading case has apparently committed suicide. Sanjay Valvani, 44, a hedge fund manager at New York-based Visium Asset Management, was found dead in an apparent suicide on 21 June in his Brooklyn residence,