Hedging on Hedge Funds (postscript on correlations, beta, and “alpha”)

Hedging on Hedge Funds (postscript on correlations, beta, and “alpha”) by Cliff Asness 
After my last piece on hedge funds I’ve gotten a lot of questions that often come down to the issue of “beta” versus “correlation” with the market and, more generally, about “alpha.”  I thought I’d share a version of my typical response.

First, in response to many otherwise good questions that I think confuse correlation with beta, they are not the same. As an example . . .


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