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Looking Beyond Diversification to Manage Portfolio Risk

Correlation asymmetrics may have an impact.
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One of the most vexing problems in investment management is that diversification can disappear when investors need it most. In fact, correlations—the degree to which returns on different assets tend to move in the same direction at the same time—tend to increase in down markets, especially during crashes. Studies have shown this effect to be pervasive across a large variety of financial assets and sectors, including individual stocks, equity country markets, global equity industries, hedge

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