Noise Reducing Methods for Correlation Matrices - Improved Return and Risk Possible in Portfolio Management?
The importance of the alluring goal of having the “perfect” or “true” information is more than visible in the financial world. In portfolio management financial correlation matrices measure the unsystematic correlations between assets e.g. stocks. Finding the true correlations between stocks would enable the creation of portfolios with less risk. In reality this information is more than hard to co