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