Breadth Calculation

CFA Level II Portfolio Management
#1

We know that Breadth is a measure of independent forecast. If active return of 4 securities are uncorrelated (Correlation=0) to with each other and forecasts are independent from year to year, then their Breadth will be 4. WHAT IF active return of 4 securities are correlated to with each other or forecasts are NOT independent?

I have found this helpful but it is not conceptually clear to me yet . http://www.cfapubs.org/doi/full/10.2469/dig.v34.n4.1579

Can any 1 please elaborate the fact.

#2

Wiley’s 11th Hour Guide shows a formula to calculate BR when there is correlation between assets:

BR = N / [1 + (N-1)correlation]

when there’s no correlation, the denominator becomes 1 and then BR = N

#3

Thank you