Is there a way to calculate portfolio correlation in simulated book section? For example, I would like to know, what is the average of correlations of all my positions - 5 longs and 5 shorts. Thanks for response.
There are many different ways to measure correlation. Different ways to handle outliers. Maybe, as you dig into the data, you decide that you care more about the correlation of the direction of returns rather than correlation of the magnitude (maybe it’s more important that when the longs go up the shorts tend to go down, than that they go up or down by the same amount). Or maybe you care more about relative correlation to the market. Your question is about “average” correlation – so you’ve already seen that you could calculate a separate correlation among those 10 positions for each week, and then ask questions about the distribution of those correlations. Or you could look at the weekly/monthly/quarterly returns for the long portfolio and short portfolio and calculate an overall correlation. Or take those weekly returns and convert them to log normal before calculating correlation.
All that to say, I think it would be most effective to pull the raw data into excel and play with it to decide what question you want answered and which measure of correlation will provide the best answer.