anshultongia

I see what they are getting at, but I don’t think it’s as simple as they are trying to make it. I would like to know the answer to CPK’s question of: are they saying if Treynor (Port)
Normally (if using the Sharpe) you would need to account for correlation between the portfolio and the new asset, but correlation is a function of std dev (total risk) so you couldn’t use correaltion of assets and portfolios when using the Treynor. Instead you would need to compare the relation between betas of the two assets, which would be a totally different measure.
Most portfolios are diversified (at least that’s the goal of many portfolios) so why would CFAI focus on using the Sharpe when adding new securities to portfolios?