Lintner Revisited: A Quantitative Analysis of Managed ... - CME Group

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EXHIBIT 7: Correlation Matrix of Traditional Alternative Investment Benchmarks
Barclay BTOP 50 Index
S&P 500 Total Return Index
MSCI World Index
Barclays Capital
Composite US Index
Barclays Capital Bond
Composite Global Index
GSCI TR
DJ UBS Commodity Index
HFRI Fund Weighted Index
HFRI Equity Hedge Index
LPX Buyout Index
S&P/Citigroup World
REIT Index
Newedge Short-Term
Traders Index
Barclay BTOP 50 Index 1.00
S&P 500 Total Return Index -0.04 1.00
MSCI World Index -0.01 0.88 1.00
Barclays Capital Composite
US Index
Barclays Capital Bond
Composite Global Index
0.20 -0.10 -0.09 1.00
0.22 0.19 0.23 0.89 1.00
GSCI TR 0.12 0.17 0.23 -0.03 0.00 1.00
DJ UBS Commodity Index 0.17 0.30 0.40 0.01 0.11 0.90 1.00
HFRI Fund Weighted Index -0.02 0.74 0.75 -0.08 0.06 0.30 0.44 1.00
HFRI Equity Hedge Index -0.02 0.73 0.72 -0.08 0.06 0.35 0.43 0.95 1.00
LPX Buyout Index -0.21 0.75 0.77 -0.10 -0.14 0.30 0.31 0.77 0.78 1.00
S&P/Citigroup World
REIT Index
Newedge Short-Term
Traders Index
-0.02 0.61 0.64 0.18 0.26 0.22 0.37 0.51 0.49 0.60 1.00
0.54 -0.50 -0.44 0.00 0.08 -0.14 -0.09 -0.34 -0.40 -0.48 -0.42 1.00
Sources: AlphaMetrix Alternative Investment Advisors, Bloomberg, LPX GmbH, Newedge. All statistics calculated to maximize number of observations; as such, number of
observations used for calculations varies (Starting Dates: BTOP 50 - Jan 1987, S&P 500 Total Return Index - Jan 1980, MSCI World - Jan 1980, Barclays Capital Bond Composite US
Index - Sep 1997, Barclays Capital Bond Composite Global Index - Feb 1980, GSCI TR - Jan 1980, DJ UBS Commodity Index - Feb 1991, HFRI Fund Weighted Index - 1990, HFRI Equity
Hedge Index - Jan 1990, LPX Buyout Index - Jan 1998, S&P/Citigroup World REIT TR Index - Jan 1990, Newedge Short-Term Traders Index - Jan 2008). All statistics calculated through
Dec 2011 with the exception of the Barclays Capital Bond indices, which did not report returns for Sep 2008 or Oct 2008.
Lintner found that the “average correlation between the monthly
returns of each manager with those of every other manager,” or
average pair-wise correlation, among the fifteen managers in his
sample was 0.285, with a minimum of 0.064 and a maximum of
0.421 (Lintner 1996, 110). This extremely low average pair-wise
correlation, and the sample maximum of 0.421 suggests that
the trading programs Lintner analyzed would generally have
contributed to a portfolio in which any of them were part of the
whole.
The average pair-wise correlation among the constituents of the
Newedge Short-Term Traders Index was 0.175, another very low
value which supports the conclusion that short-term traders, like
those managed futures programs in Lintner’s sample, generally
exhibit low correlations to one another (Burghardt et.al. June 9,
2008, 4).
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Past performance is not necessarily indicative of future results.