{"id":40890366,"date":"2023-07-26T18:10:18","date_gmt":"2023-07-26T12:40:18","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890366"},"modified":"2023-07-26T18:10:19","modified_gmt":"2023-07-26T12:40:19","slug":"correlation-vs-returns-volatility","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2023\/07\/26\/correlation-vs-returns-volatility\/","title":{"rendered":"Correlation vs. Returns &amp; Volatility"},"content":{"rendered":"\n<p>The <a rel=\"noreferrer noopener\" href=\"https:\/\/stockviz.biz\/index.php\/2023\/07\/22\/index-pair-wise-correlation\/\" target=\"_blank\">previous post<\/a> presented historical NIFTY 50 constituent pair-wise correlation distributions and discussed how high correlation environments persist. How do the 5th-quintile return and volatility look like?<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.5-quintile.ret-vol.violin.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>If you focus on the 5, 10 and 20-day pair-wise correlations (T5, T10 &amp; T20), you&#8217;ll see large left-tailed returns and high volatility in the 5th quintile compared to the others (<a rel=\"noreferrer noopener\" href=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.1-quintile.ret-vol.violin.png\" target=\"_blank\">1st<\/a>, <a rel=\"noreferrer noopener\" href=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.2-quintile.ret-vol.violin.png\" target=\"_blank\">2nd<\/a>, <a rel=\"noreferrer noopener\" href=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.3-quintile.ret-vol.violin.png\" target=\"_blank\">3rd <\/a>&amp; <a rel=\"noreferrer noopener\" href=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.4-quintile.ret-vol.violin.png\" target=\"_blank\">4th<\/a>).<\/p>\n\n\n\n<p>Looking at this the other way, T10 &#8211; the 10-day pairwise correlation &#8211; has this profile:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/index-correlation\/NIFTY%2050.10-corr.ret-vol.violin.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>It looks like if you dodge the 5th quintile here, you might be able to boost returns in linear strategies.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The previous post presented historical NIFTY 50 constituent pair-wise correlation distributions and discussed how high correlation environments persist. How do the 5th-quintile return and volatility look like? If you focus on the 5, 10 and 20-day pair-wise correlations (T5, T10 &amp; T20), you&#8217;ll see large left-tailed returns and high volatility in the 5th quintile compared &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2106273,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[954,2761],"class_list":["post-40890366","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-correlation","tag-quant","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890366"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890366\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2106273"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}