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- aptenodyte
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portfolio correlation
Does anyone have suggestions on how to find a portfolio weight vector to maximize correlation with another portfolio?For example I have a pre-specified portfolio of hedge fund returns that I cannot trade, but want to maximize correlation with this through some other tradable assets - I have a sample coveriance matrix, breaking down the problem it looks a lot like the classic mean-variance optimization problem with obvious constraints onn the target weight vector -
portfolio correlation
OLS regression does this, although it may not be the best choice. You may want a more robust method.Also, do you want to maximize the correlation of the portfolio values or returns? This is an important distinction. If returns, over what period?