Correlation Matrix

The correlation matrix on the Inputs Worksheet describes the relationship between individual assets.  Correlation values range from -1 to 1.  Values of 1 populate the diagonal within the matrix, indicating each asset's correlation with itself.  We strongly recommend estimating correlation matrices all at once through a valid statistical procedure, guaranteed to create a positive definite or positive semi-definite (valid) correlation matrix. This is normally the case when inputs are generated in the Estimator. However, it is possible in the Optimizer to input your own asset correlations manually.  If you do enter the correlations manually, you only need to complete the correlations either above or below the diagonal progression of 1s as the Optimizer automatically populates each cell's duplicate.  

Note that the Optimizer expects the matrix of Full Correlations as the input, not the matrix of Partial Correlations, which is available in the Estimator via a drop-down menu. 

Manual alterations to correlation matrices often result in inconsistent values and poorly conditioned matrices.  These will lead to numerical problems or even infeasible optimizations.  We do not recommend making manual tweaks to individual values in the correlation matrix.  However, in the case that a correlation matrix is badly specified, the Covariance Fixer can be licensed to find the nearest well-conditioned matrix.