The basis for portfolio risk analysis and portfolio optimization is a cleanly calculated correlation matrix. It provides information on the extent to which the price developments of the individual securities in the portfolio are related. A high positive correlation between two securities means that they behave very similarly. A negative correlation, on the other hand, indicates an opposite performance.
Within milliseconds, our Correlation Module calculates a correlation matrix for each portfolio in any base currency based on eight or more years of price history.
The correlation matrix is not only the starting point for further calculations and optimizations – it also helps in discussions with clients. For example, in the context of portfolio optimization, it illustrates why one automobile stock is preferred over another.