Style Analysis
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The main purpose of style analysis is to provide added
insights into the characteristics of a particular portfolio (or group of
portfolios), e.g. whether it is biased towards ‘growth’ rather than ‘value’
securities or to ‘large cap’ rather than ‘small cap’ securities.
Style analysis can be carried out by reference to the
portfolio's current holdings. It is then in effect a subset of (and catered for
by) Nematrian's risk
measurement algorithms.
Alternatively it can involve analysing the behaviour of the
portfolio's past returns and how these returns correlate with returns that
characterise the style factor(s) being considered (using regression techniques).