Minimum Correlation Portfolios

What is the objective of these portfolios?
These portfolios have the objective of minimizing the correlation between asset classes to reduce overall portfolio volatility while maximizing potential returns. By focusing on low-correlated assets, the portfolios aim to achieve a smoother and more stable performance across different market conditions.

What qualifies as a Minimum Correlation Portfolios?
These portfolios qualify as "Minimum Correlation Portfolios" because they use a dynamic asset allocation strategy that prioritizes the selection and weighting of assets with the lowest possible correlations. This minimizes the impact of any single asset class' volatility, leading to a more diversified and resilient portfolio.

Why is this family of portfolios rebalanced and tracked each month?
The Minimum Correlation Portfolio family was created and tracked to offer investors a method of reducing risk by minimizing correlations between assets, rather than just diversifying across traditional asset classes. By adjusting allocations in response to changing correlations, these portfolios provide a systematic way to balance risk and return over time.

What portfolio recipes are included in the Minimum Correlation Portfolios family?
RecipeInvesting tracks the following Portfolio Recipes in the category of Minimum Correlation Portfolios:

• Minimum Correlation Portfolio (t.coco): chooses from a set of 8 asset class ETFs based on a correlation matrix that combines assets to create a weighted portfolio with the lowest overall correlation.
• Minimum Correlation A Portfolio (t.mca1): creates a correlation matrix that calculates the correlation of the assets in a set of 8 asset class ETFs, then solves to find the combination of assets that gives the weighted portfolio the lowest overall correlation.
• Minimum Correlation B Portfolio (t.mca2): creates a correlation matrix that calculates the correlation of the assets in a set of 8 asset class ETFs, then solves to find the combination of assets that gives the weighted portfolio the lowest overall correlation.

What do Minimum Correlation Portfolios have in common?
All of the Portfolio Recipes in the Minimum Correlation Portfolios Family share the following characteristics:

• Tactical / Dynamic approach
• Rebalance frequency
• Number of possible asset classes invested

How do Minimum Correlation Portfolios differ?
Despite their similarities, Portfolio Recipes in the Minimum Correlation Portfolios Family can differ based on these attributes:

• Different asset allocation algorithm to identify correlation between asset classes

Comparison of Minimum Correlation Portfolios