Calculating Covariances Relative to a Benchmark
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Document ID: 1998-693 (previously 1998/003)
Published on: 1st March 1998
Author: David Carruthers
The standard “absolute” covariance matrix measures the covariance between assets relative to a risk free asset. Alternatively, the adjusted “relative” covariance matrix measures the covariance between assets relative to a particular benchmark.
