Portfolio Management - Reading 51- EOC 14 and 15. Correlation Calculation.

CFA Level II Portfolio Management
#1

Hello,

My question relates to Portfolio Management, Reading 51 - Analysis of Active Portfolio Management ; EOC 14 and 15.

Basically, looking a the correction of those 2 question, we have to calculate IC in question 14 and TC in question 15.

IC = COR(R/σi,u/σi)

TC = ρ(μi / σi, Δ_wiσi_)

OK fine I get the idea. Now, how do you actually calculate the correlation? The examples dont give the detail. They just show 2 tables with values for R/SD,u/SD and u/SD,Active weight x SD. Now what do I do with that please? How do I actually get the COR?

Thanks a lot for your help.

#2

Level I material. (at least it was LI when I took it in 2014.)

But you will find full calculation in the blue boxes somewhere (BB No. 6)

#3

Hey

You would want to use the DATA and STAT function on the calculator if you are using the TI calculators.

Use DATA to input the variables

use STAT to find the correlation.

also remember to set the DATA function to linear.

I am sure there is a more detailed guide on the internet.

#4

Oops I’m using HP. I hope they won’t give us a correlation calculation on the exam because manually it takes ages.