It is often touted by investment professionals that diversification across asset classes minimizes risk. However this is often difficult to do as positive correlation between asset classes are more pronounced during "bad times", due to overlapping exposure of equities, commodities, and credit spreads to the changes in global macroeconomic growth, legal regulations, and investor risk aversion. Two seemingly uncorrelated asset classes may be exposed to the same risk- both a hardware startup in alternative assets and large silicon corporation in the semiconductor industry which is fairly stable public equities will experience similar returns during such market cycles. The Two Sigma Lens is a framework for making investment decisions based on a parsimonious set of factors to gauge actionable insights.
Two Sigma Factor Lens
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