Portfolio optimization continues to be a hot topic as investors, finally recovering from the global financial crisis, come to terms with its harsher lessons. The traditional view of a diversified portfolio having many different asset classes is giving way to the view that it’s more important to diversify risk factors, regardless of how the exposure to those factors is purchased. Diversification among risk factors “For asset classes, there is a jump in the average cross-correlation from 30% during quiet markets to 59% during turbulent markets. This rise in correlation comes primarily from the various equity and equity-driven asset classes. The…