Calculating Covariance for Effective Stock Portfolio Management

Discover how to calculate covariance to assess stock relationships and optimize your portfolio, balancing risk and potential ...
Risk

Converting a covariance matrix from local currencies to a common currency

This short paper demonstrates how a covariance matrix estimated using log returns of multiple assets in their respective base currencies can be converted directly into a covariance matrix in a single ...
Risk

The informativeness of risk factor disclosures: estimating the covariance matrix of stock returns using similarity measures

While risk factor disclosures in 10-K filings have been criticized by practitioners as generic and boilerplate, recent studies indicate that these risk reports can be informative. This study ...
International Monetary Fund

High-Dimensional Covariance Matrix Estimation: Shrinkage Toward a Diagonal Target

This paper proposes a novel shrinkage estimator for high-dimensional covariance matrices by extending the Oracle Approximating Shrinkage (OAS) of Chen et al. (2009) to target the diagonal elements of ...