2025/07/08 – In-Person and On-Line
Diversifying with purpose: relative vs. absolute risk
Seminar by William Morris
The LQG is very grateful to the hosts of this seminar: Snowflake.
Diversifying with purpose: relative vs. absolute risk
Normalised returns present a second dimension to risk, and an intuitive way to achieve meaningful portfolio diversification.
Traditional measures of portfolio diversification either focus narrowly on variance reduction via imperfect correlations, or lack purpose beyond deeper technical sophistication. I argue that the intuitive and primary purpose of diversification in any context is to mitigate relative, not absolute, risk. I introduce the concept of normalised returns and show that portfolios optimised using them exhibit a factor-like awareness of underlying exposures. Moreover, the problem of sensitivity to model inputs can be solved using the notion of relative risk tolerance.
Download Diversifying with purpose: relative vs. absolute risk
About the Speaker
William Morris
Head of Investments
Weatherbys Private Bank
William Morris, CFA is Head of Investments at Weatherbys Private Bank. He has over 15 years of experience encompassing investment advice, portfolio optimisation and risk modelling, and enjoys bringing this world to life in a friendly and engaging way.
His career has bridged time spent in front of clients as well as in investment engine rooms. Most of his decade at Barclays was focused on strategic asset allocation research, while at Oxford Risk he worked on data science relating to behavioural finance.
William achieved a First Class Master’s in Mathematics from Imperial College London, where he was awarded a G-Research award for Academic Excellence. Outside work, he is mostly preoccupied with transporting his daughter.
