Correlation and other Dependency Concepts

Agenda Program Online
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Available exclusively as online training
Price of online training
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Attend this 2-day training seminar and learn about:

Correlation and Dependency Concepts in Financial Market Data
Properties of Correlation and the Correlation Matrix
Correlation in Modern Portfolio Theory
Simulating Correlated Data and Forecasting Correlations
Deriving Asset Correlations from Factor Correlations
Time Series Models for Correlations
Information about advanced methodologies in modelling dependency structures is hard to find and often fragmentary. In this 2-day programme, correlation and related dependency concepts take centre stage: After an introduction to empirical and mathematical properties of the traditional correlation concept, more recent methodologies are presented which allow deeper insights into real-world dependency structures and solve practical issues in working with scenario-based approaches and deriving forward-looking estimators.

Target Audience: risk analysts, quantitative analysts, investment analysts, asset managers both traditional and alternative, and system developers.

Program of the seminar: Correlation and other Dependency Concepts

The seminar timetable follows Central European Time (CET).

09.00 - 09.10 Welcome and Introduction

09.10 - 12.15

Overview and Review Correlation and Dependency Concepts

Stylized Facts about Correlations & Dependencies in Financial Market Data

  • Contagion Effects in Stock Correlations
  • Globalisation in Global Equity Investing
  • Bonds as a Safe Haven Asset
  • Is Gold a Safe Haven?

Exercise: Calculating tail and downside correlations

12.15 - 13.15 Lunch Break

13.15 - 17.00

Mathematical Properties of Correlation and the Correlation Matrix

  • Validity of a Correlation Matrix
  • Fixing a Broken Correlation Matrix
  • Alternative Correlation Concepts
  • Spearman Rank Correlation
  • Kendall's T
  • Spectral Decomposition of a Correlation Matrix: Eigenvalues and Eigenvectors
  • Singular Value Decomposition of Correlations
  • Autocorrelation: Dependency over Time
  • Co-integration and its Use in Trading

Exercise: Examining the validity of a correlation matrix

09.00 - 12.15

Correlation in Modern Portfolio Theory: Diversification

Scenario Analysis & Stress Testing

  • Tweaking Individual Entries in a Correlation Matrix
  • Changing Blocks of Correlation Values
  • Extrapolating Trends in Correlations: "Risk On" and "Risk Off" Scenarios
  • Randomizing a Correlation Matrix
  • Handling the Additivity of Conditional Correlations

A General Theory of Dependency: Copulas

  • Introduction to Copula Theory
  • Applications of Copula Theory
    • Data Analysis
    • Stress Testing

Exercise: Identifying copulas in an international asset class universe

Simulating Correlated Data

  • Multivariant Normal Data
  • Solutions for Non-Normal Data

12.15 - 13.15 Lunch Break

13.15 - 17.00

Stochastic Process Models for the Correlation Coefficient

Forecasting Correlations

  • Historical Estimators
  • Robust Estimators
  • Bayesian Shrinkage Estimators: Jorion, Ledoit/Wolf
  • Implied Correlations from Derivatives Instruments
  • Deriving Asset Correlations from Factor Correlations

Time Series Models for Correlations

  • Exponential Smoothing
  • Multivariate GARCH
  • Dynamic Conditional Correlation (DCC)

Exercise: Analysing the volatility risk of a multi-asset-class portfolio based on robust correlation scenarios

Termination and Evaluation of the Seminar

Training catalogue in PDF
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