PORTFOLIO DIVERSIFICATION: ROLE OF CORRELATION IN SETTING DIVERSIFICATION STRATEGY

Authors

  • Reena Shukla
  • Pooja Mishra

Keywords:

Alternative Investments; Correlation; Correlation Matrix; Diversification; Investments; Portfolio; Risk and Return.

Abstract

Through the entire portfolio construction process, it is vital to reduce exposure to risk by combining a variety of investments so to make balances between the risk and return of various types of investment. Diversification is not only alive and well; it is the best way to smooth out unsystematic risk events. The phrase “diversification” is thrown around quite often when it comes to investing. The only way to achieve real diversification is by investing in different asset classes with low correlation to each other. This paper focuses to statistically analyze the investment decisions involved in constructing a diversified portfolio with special consideration of broad assets allocation strategy (diversification). We here will statistically discuss the importance of correlation in diversification and also throw some light on alternative investment as a risk reduction technique. We also explore the stock market data to analyze the paper.

Author Biographies

Reena Shukla

Research Scholar, Registration No: 1209072, Department Of Management, I. K. Gujral  Punjab Technical University, Jalandhar, Punja

Pooja Mishra

Campus Director and Professor, Department Of Management, Aman Balla Group of Institutes, Kotli, Pathankot, Punjab

Downloads

Published

2020-04-22

How to Cite

Shukla, R., & Mishra, P. (2020). PORTFOLIO DIVERSIFICATION: ROLE OF CORRELATION IN SETTING DIVERSIFICATION STRATEGY. ADMINISTRATIVE DEVELOPMENT: A Journal of HIPA Shimla, 6(2), 117–138. Retrieved from https://qtanalytics.in/journals/index.php/HIPA/article/view/531

Issue

Vol. 6 No. 2 (2019): Administrative Development " A Journal of HIPA, Shimla"

Section

Articles

License

Upon acceptance of an article, authors will be asked to complete a 'Journal Publishing Agreement'. An e-mail will be sent to the corresponding author confirming receipt of the manuscript together with a 'Journal Publishing Agreement' form or a link to the online version of this agreement.

Subscribers may reproduce tables of contents or prepare lists of articles including abstracts for internal circulation within their institutions.  Permission of the Publisher is required for resale or distribution outside the institution and for all other derivative works, including compilations and translations. If excerpts from other copyrighted works are included, the author(s) must obtain written permission from the copyright owners and credit the source(s) in the article. As a general rule, permission should be sought from the rights holder to reproduce any substantial part of a copyrighted work. This includes any text, illustrations, charts, tables, photographs, or other material from previously published sources. 

This journal permits and encourages authors to post items submitted to the journal on personal websites or institutional repositories both prior to and after publication, while providing bibliographic details that credit, if applicable, its publication in this journal.