Current-book diversification: the confidence-bound result
Author: Arhan Canli
Program: ALPHAC / AlphaC Algorithms
Study classification: retrospective existing-return risk remeasurement
Capital: research simulation over a paper-trading specification
Result
The exact current four-sleeve research specification is diversified, but it does not meet the program's governing average-correlation point gate. Across the 1,061-row common window from 2023-07-07 through 2026-06-01:
| Measurement | Result | Governing comparison | Outcome |
|---|---|---|---|
| Average pairwise sleeve correlation | +0.0248 | at most 0.00 | fails |
| 95% upper bound, 63-row block bootstrap | +0.0487 | at most +0.10 | passes |
| Maximum ordinary pairwise correlation | +0.2098 | at most +0.35 | passes |
| Maximum ordinary pair upper 95% bound | +0.3025 | at most +0.35 | passes |
| Stressed design correlation | +0.50 | at most +0.50 | passes at the boundary |
| Sleeve-only diversification ratio | 1.8153 | diagnostic | not a gate |
| Effective independent sleeves | 3.8988 of 4 | diagnostic | not a gate |
The long-run portfolio objective is approximately −0.03 average correlation. The current measured point is 0.0548 above it. Calling +0.0248 “near zero” may be descriptively reasonable, but it does not turn a positive value into a pass against a non-positive gate.
What was measured
The study reconstructs the same exact current book used by the current-composition drawdown study:
alphavintage_live, 25%;crypto_carry_wk, 25%;k30_dn_63, 25%;managed_futures, 25%; and- the separately disclosed 10% strategic overlay split between BTC and SPY.
Sleeve correlation uses the four sleeve returns only. The strategic overlay remains separate and is included in full-book and marginal-Sharpe diagnostics. The reconstructed sleeve contributions plus overlay equal the book return with zero numerical residual.
Confidence procedure
The primary uncertainty estimate uses 10,000 synchronized circular moving-block resamples, each as
long as the observed 1,061-row window, with seed 20260825 and a 63-row block. Resampling the four
columns together preserves contemporaneous cross-sleeve dependence. The one-sided upper bound is
the empirical 95th percentile.
| Block length | Bootstrap mean average correlation | Upper 95% | Maximum pair upper 95% |
|---|---|---|---|
| 21 rows | +0.0245 | +0.0484 | +0.2861 |
| 63 rows, primary | +0.0247 | +0.0487 | +0.3025 |
| 126 rows | +0.0244 | +0.0491 | +0.3086 |
The primary upper-bound Monte Carlo standard error is approximately 0.00030. Block-length sensitivity does not change the conclusion: the point gate fails and the confidence-bound gates pass.
Pairwise structure
The six observed pairwise correlations are:
| Pair | Correlation |
|---|---|
| AlphaVintage / crypto carry | +0.0393 |
| AlphaVintage / equity momentum | −0.0620 |
| AlphaVintage / managed futures | −0.0444 |
| Crypto carry / equity momentum | −0.0134 |
| Crypto carry / managed futures | +0.0197 |
| Equity momentum / managed futures | +0.2098 |
The equity-momentum / managed-futures pair is the largest ordinary dependence. Its primary bootstrap upper bound remains below the prospective 0.35 ordinary-pair ceiling.
Marginal historical diagnostics
For each diagnostic, one sleeve's committed contribution is replaced by cash while every other weight and the strategic overlay remain unchanged. These are in-window research diagnostics, not reweighting instructions:
| Sleeve replaced by cash | Full-book research Sharpe | Without sleeve | Marginal delta |
|---|---|---|---|
| AlphaVintage | 1.7846 | 1.7909 | −0.0063 |
| Crypto carry | 1.7846 | 1.2520 | +0.5326 |
| Equity momentum | 1.7846 | 1.6378 | +0.1468 |
| Managed futures | 1.7846 | 1.8755 | −0.0908 |
Negative historical marginal values do not authorize deletion. The data were known before this protocol, the comparison is in-sample for this purpose, and existing sleeves predate the prospective admission contract. Any allocation change would require a new declared evidence epoch.
What this establishes—and what it does not
This study establishes a reproducible description of the exact current research composition. It shows that most pairwise and confidence-bound controls are inside their prospective ceilings, while the governing average-correlation point gate is not.
It does not establish live-forward diversification. The frozen research curves end before the broker-reconciled forward record begins; the returns were known before the protocol; no independent human replication exists; and the window is not crisis-complete. It proves neither alpha nor the 1.5 forward-Sharpe objective and spends zero new hypothesis identities.
Reproduction
uv run python scripts/analyze_current_book_diversification.py
The machine-readable result is
artifacts/analysis/current_book_diversification/result.json. Its content hash is
sha256:42971513076f2ff21024e343c2ef771a78cbaeb2b3b6160f7d28a526dd4da256.