Diversification doesn't always work as expected, and asset correlations can shift during market stress. In 2008, bonds offset equity losses, but in 2022, stocks and bonds fell together. On paper, ...

On paper, diversification looks simple: Mix stocks, bonds, and maybe a few alternatives to reduce portfolio risk. Unfortunately, diversification is not always enough to create a bulletproof portfolio.

Risk-management practices at financial institutions have undergone a quantitative revolution over the past decade or so. Increasingly, financial firms rely on statistical models to measure and manage ...