Reactions to the Russo Ratio

Investor Analytics’ publication of the Russo Ratio – the new analytic that separates risk into volatility and correlation components – seems to have created a bit of a stir. It’s been downloaded hundreds of times and we’ve gotten comments from many portfolio managers, risk managers and academics including some of the post prominent and well respected names in the industry.

We’ve consolidated those discussions into a blog post on our company’s site and we invite you to join the discussion. You can read about those comments and join the discussion here.

In the original paper, we introduced three new analytics: CCR – the Correlation Contribution to Risk, VCR – the Volatility Contribution to Risk, and the Russo Ratio: CCR/VCR, which provides a compact way of understanding how much diversification benefit is inherent in the portfolio. The short paper we published explains these measures and analyzes three different portfolios using them to show the effects of low and high diversification.