F_A_Warrior

[F_A_Warrior]

Up

4

::

@tuckandturn:

Hi tuckandturn, thats actually a very relevant question . When you compute correlation in Excel, the two assets need to have the same number of values so if there are no values for one of the assets, it will just ignore those cells and the corresponding cells for the other assets. For the GLD vs. SIL example, the correlation will be computed only up until 2010 and all GLD data prior to 2010 will be ignored. In other words, the most recent date of the two is used.

This also means that some correlations on the table are based on 10 years of data while others, involving more recent assets such as the junior gold minors or the Israel ETFs, are based on much less data.

Also, the reason it does not display the formulas is that I used the correlation tool in the data analysis add-in on Excel. It is a much quicker way to build a correlation matrix. The data analysis tool also helps you build a variance covariance matrix which is helpful in portfolio optimization.

I hope this answers your question, feel free to ask if you have other questions.

Cheers!

Miguel Romain
Financial Analyst Warrior

[Author]

Posts