For your sake, do not base any investment decisions off of this model. Historical correlation != future correlation. You are MUCH better off using the Fama-French three factor model as a starting point.
An example of historical correlation severely understating risk was the 2008 financial crisis. Default rates of mortgages in, say, Florida that historically had little correlation with default rates of mortgages in Nevada suddenly became very correlated. Measuring risk in this fashion is not robust enough for investment decisions
An example of historical correlation severely understating risk was the 2008 financial crisis. Default rates of mortgages in, say, Florida that historically had little correlation with default rates of mortgages in Nevada suddenly became very correlated. Measuring risk in this fashion is not robust enough for investment decisions
http://en.wikipedia.org/wiki/Fama%E2%80%93French_three-facto...