Taking Out the Outliers

Taking Out the Outliers

If you do anything that depends upon correlation, you owe it to yourself to be aware of outliers and how to deal with them. For example, a mean-variance optimized portfolio using Modern Portfolio Theory or the Black Litterman model is critically dependent upon, and...

Variety of Covariance Ellipses

I found it helpful to look at a variety of covariance ellipses for tame distributions so that I would have a better feel for those I come across in the wild. Following is a quick tour that I hope will show the effect of changing the parameters of the distributions of...

Covariance Ellipses

In my quest to understand correlation and covariance better, I took a short trip down the rabbit hole to visit eigen vectors and returned carrying a covariance ellipse. In my next post I will tie these concepts together when I re-visit the real-world issue of...

Random Correlated Series Generator

It is often a challenge to de-bug code that involves large numbers of long stochastic series – it is very easy to think you have it right and not so easy to make sure. Lately I have needed to generate random correlated series whose means and covariance...