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25 October 2011

The Largest Correlation Matrix You've (Probably) Ever Seen

Presented below is a snapshot of a correlation matrix of all 500 S&P index components (equal weighted). Values were shaded to correspond with low correlations (red) and high correlations (green). Correlations based on returns from present going back to Jan 1, 2011.

The full matrix, composed of 250,000 individual calculation results was generated by the RiskAPI system in about 10 seconds. For those interested, the full result set is available for download here.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

27 September 2011

Silver Volatility Jumps

The dramatic sell-off in the commodities markets that was kick started by last Wednesday's (9/21) FOMC meeting resulted in an equally dramatic increase in realized volatility, most notably in the precious metals. The greatest casualty of this liquidation was Silver, which saw a fall from $40 to a low of $26 in overnight trading early Monday, a decline in excess of 30% in a mere 3 days of trading.

The effect of this move on spot silver's realized volatility has been quite dramatic, jumping from a 30-day low of 29% to as high as 72% in 48 hours. Below is a volatility-over-time chart for the white metal:

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

23 September 2011

Operation Twist: 3 Standard Deviations

With the EU debt crisis occupying front page headlines since early August, all eyes have been on the major European stock indexes. Markets have been attempting to come to terms with lackluster EU-zone growth projections, undercapitalized banks, and (worst of all) structural contagion due to the spectre of sovereign default.

Here are the current major Equity indexes and their associated realized volatilities measured since August 1.

IndexRealized VolatilityRealized Volatility FX Included
CAC39.62%43.85%
DAX52.32%56.68%
MIB48.70%55.42%
IBEX43.71%61.95%
ATHEX58.14%50.53%
FTSE34.32%36.71%

The results in column 1 were calculated independent of currency exposure, such that each volatility is based on index returns only. Column 2 index volatilities are measured from a USD perspective in that the results include the volatility of the index as well as the un-hedged currency exposure of a USD-based portfolio manager invested in each index. In all cases except for the FTSE 100, the un-hedged currency exposure is due to the EURUSD exchange rate (for the FTSE the exposure is due to GBPUSD rate).

Of startling note is the wide margin between the Euro-zone index volatilities and that of the UK-based FTSE-100. The decision by UK voters not not participate in the Euro is certainly presenting itself quite starkly in these statistics.

The results above were calculated using The RiskAPI Add-In, our unique software client which allows fund managers to access a whole spectrum of on-demand portfolio risk analysis calculations.

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