Fin Maverick
.
Measuring Risk
in a Portfolio
Every risk measure misses something.
Know what yours misses.
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Volatility
How much it swings
What volatility misses
Treats a jump up like a fall
Drawdown
The worst fall from a peak
What drawdown misses
One bad episode, not how often
Correlation
How two assets move together
What correlation misses
Can change just when it matters
Diversification
Risk falls as holdings are added
What diversification misses
The shared movement it cannot remove