RT Journal Article SR Electronic T1 Practical Applications of Extreme Correlations and Optimizing for Stress JF Practical Applications FD Institutional Investor Journals SP 1 OP 3 DO 10.3905/pa.2015.3.1.115 VO 3 IS 1 A1 Wesley K.S. Phoa A1 Gauri Goyal YR 2015 UL https://pm-research.com/content/3/1/1.11.abstract AB Extreme Correlations and Optimizing for Stress Wesley K.S Phoa In this report, Wesley Phoa offers a new approach from a branch of statistics known as extreme value theory. Phoa studies “outlier,” or extreme tail correlations, and comes up with some implementable findings.Volatility in financial markets is picking up again after a relatively long period of low volatility, putting the need to optimize portfolios for stressed markets “back on peoples’ radar,” notes the author.Most investors understand that in dislocated or stressed markets, asset correlations change—often tending to 1, which implies positive correlation. But they don’t always know to what extent their portfolios can be impacted, and their hypothetical scenario testing can have subjective biases, says Phoa, a Partner at The Capital Group Companies in Los Angeles .