suitcase icon HiddenLevers Knowledge Base calendar iconSchedule Training

What is "Correlation Risk"?

The number at center is a measure of both correlation and concentration risk, computed based on the portfolio's full correlation matrix. The metric ranges between 0 and 1, with 0 representing an infinite number of perfectly uncorrelated positions, and 1 representing any number of perfectly correlated positions. A single position portfolio also receives a score of 1 (based on extreme concentration risk).

For highlighting economic sensitivities, the "Lever Impacts" section of the Risk Measures widget shows exactly this. It lists different economic indicators that our model shows to impact a portfolio. The impact coefficient measures the sensitivity of the portfolio to the lever in % terms. For instance, if the impact coefficient for Oil is 1.5, this means that for every 1% move up in oil, the portfolio will move up 1.5%.

The "Portfolio-Index Correlation" figure shows how correlated the entire portfolio is to various indices.