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Portfolio Intuition by Chris Kennedy
A friend of Alpha Theory, Niraj Bhatt of Harbor Spring, sent over a paper from Chris Kennedy of Bridge Alt+ titled "Portfolio Intuition”. Chris explains how determining which asset to add to the portfolio can sometimes be very unintuitive.
After reading our recent Diversity Orthogonality Theory post, a friend of the firm, Niraj Bhatt of Harbor Spring, sent over a paper from Chris Kennedy of Bridge Alt+ titled "Portfolio Intuition”. In it, Chris explains how determining which asset to add to the portfolio can sometimes be very unintuitive. As a teaser, here’s a quick intuition test from the paper to encourage you to read it.
SPOILER: An investor is indifferent to each. Every asset improves the portfolio’s risk-adjusted return by the same amount. A1 vs A2 boggles the mind. Now you have to read it.
Niraj even went so far as to recreate the examples in Excel and provide a handy tool for comparison and was kind enough to share it with the Alpha Theory community. Here is where you can download a copy.
Our work with CenterBook Partners has taught us the benefits of a comprehensive approach to portfolio management and "Portfolio Intuition” puts it into easy-to-understand math. In the future, you will see these proven concepts in Alpha Theory enhancements.
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