[R-SIG-Finance] making sense of 100's of funds

paul sorenson sf at metrak.com
Sun Aug 19 01:04:43 CEST 2007

Probably not unsurprisingly, the correlation between the SP200 and the 
global share fund daily returns goes up (from 0.16 to 0.42) when I 
insert a 1 day lag.

http://www.metrak.com/tmp/exch10.png has plots produced by ccf().

Brian - if I want to look at returns over a different period using 
PerformanceAnalytics when the base data is daily, is the normal strategy 
just to undersample prices before calling CalculateReturns?

I am guessing that the correlation of the SP200 and global share fund 
would increase when looking at a longer time period.  I also want to 
compare it with some other data which comes out monthly.


BTW sorry if I am boring you guys with what must be very basic stuff - 
just tell me.

Brian G. Peterson wrote:
> paul sorenson wrote:
>> I ran a pairs plot on the daily fund returns as well as calculating 
>> the correlation coefficient (Pearson).
>> The pairs plot is reproduced at http://www.metrak.com/tmp/exch09.png 
>> and unless I am missing something, some of these "look" significant 
>> whereas some don't.
> The pairs plot will certainly show you funds that closely track the 
> index.  A quick check of cor() (or the Pearson correlation coefficient) 
> and CAPM.alpha() will do the same.  A pairs plot (and to a lesser extent 
> correlation) won't show you anything about systematic out-performance or 
> under-performance, while alpha is a good indicator if the benchmark you 
> choose is indicative of the investment universe of the fund.  Another 
> good indicator is Sortino's Upside Potential Ratio, especially if you 
> choose the benchmark index standard deviation as your MAR.
> CAPM alpha will not be a good indicator if you choose an index that is 
> different from the investment style of the fund.  For example, using a 
> SP200 index with a fixed income fund wouldn't make any sense.
> Cheers,
>    -Brian

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