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Factor / Low-Risk#461tier 3experimental liveNew

betting against correlation

cadence: Dailydata: lowlong onlyshort onlylong short
paper
2020
Source
Asness, C., Frazzini, A., Gormsen, N. J., Pedersen, L. H. (2020). Betting Against Correlation. Journal of Financial Economics 135(3), 629-652.
Read the paper β†’

What it checks

Asness, Frazzini, Gormsen & Pedersen (2020): the low-risk effect is driven by the correlation leg of beta; a BAC portfolio (long low market-correlation, short high-correlation, volatility-matched) earns a premium distinct from idio-vol/lott

Mechanism

Asness, Frazzini, Gormsen & Pedersen (2020): the low-risk effect is driven by the correlation leg of beta; a BAC portfolio (long low market-correlation, short high-correlation, volatility-matched) earns a premium distinct from idio-vol/lottery and supports leverage-constraint theory. Compute each ticker's rolling 252d return-correlation with SPY (orthogonal to its volatility), tilt long when in th

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag, or once a multi-family blend that includes it earns a champion slot.
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Signal rule

Asness, Frazzini, Gormsen & Pedersen (2020): the low-risk effect is driven by the correlation leg of beta; a BAC portfolio (long low market-correlation, short high-correlation, volatility-matched) earns a premium distinc

Data dependencies

  • daily_prices

    Adjusted-close OHLCV for every US-listed ticker; primary price feed.

  • spy_prices

    Worker data table, see services/worker schema.

Expected edge

Paper window
Modern daily equity data

friction premium; decay risk 3/5.

Example tickers where this is likely to fire

SPYAAPLNVDATSLA

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

babQuality

Betting Against Beta (Frazzini-Pedersen 2014): for a single stock, scale exposure inversely to its rolling beta vs SPY. Lower-beta moments get a bigger position, high-beta moments get reduced β€” the stock-level analog of the BAB factor. Long-only with a positive-trend gate (only when close > close 252d ago) to avoid leveraging into downtrends.

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For informational and educational purposes only. Not financial advice. Learn more