The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to talk about why understanding asset class correlations can help save your butt. A lot of the stuff that we’ve been doing recently with our research team and back-testing wise has been in the realm of underlying asset correlations and building uncorrelated baskets of securities. And so, what we’ve been trying to do is not only study the relationship between different industries and ETFs to one another and what their long-term correlations have been or not, but also trying to understand how we can build baskets of option strategies in different ETFs and sectors that have very little to do with one another, so how can we get as much diversification benefit with as little number of tickers in our portfolio as possible. And so, I think the key that I want to get across today is not necessarily that you have to memorize every single asset class correlation to another asset class, but it’s just that you s