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Correlation & Tail Hedging
Risk & Capital · Portfolio & Margin MathWhy correlations jump to 1.0 in crashes and how to enforce Portfolio Heat and sector caps.
Topics in this Sub-Topic
Explore each dedicated topic below inside the 3-level Trade School hierarchy (Risk & Capital / Portfolio & Margin Math / Correlation & Tail Hedging).
Correlation Breakdowns: Why 5 Banking Longs Equal One 5x Bet
Avoiding hidden concentration risk by clustering correlated positions and combining Trend + Non-Directional strategies.
Total Portfolio Heat Ceilings & Parametric Value-at-Risk (VaR)
Capping simultaneous open stop-loss risk (Portfolio Heat) at 5%–6% of equity across all open positions.
Lessons
- Correlation Breakdowns: Why 5 Banking Longs Equal One 5x Bet
Avoiding hidden concentration risk by clustering correlated positions and combining Trend + Non-Directional strategies.
- Total Portfolio Heat Ceilings & Parametric Value-at-Risk (VaR)
Capping simultaneous open stop-loss risk (Portfolio Heat) at 5%–6% of equity across all open positions.