Table 8 Comparative analysis of covariance estimation methods using financial metrics. Monthly return data benchmark test simulation results.
From: Application of regularized covariance matrices in logistic regression and portfolio optimization
Evaluation index | Estimation methods | ||||
|---|---|---|---|---|---|
Sample covariance | Ledoit-Wolf | Aggregation | ASRM | Nonlinear-shrinkage | |
Total revenue | \(2.1 \times 10^{-7}\) | \(6.8 \times 10^{-3}\) | \(7.5 \times 10^{-3}\) | \(8.2 \times 10^{-3}\) | \(-0.11 \times 10^{0}\) |
Portfolio risk (S.D.) | \(2.0 \times 10^{-8}\) | \(3.0 \times 10^{-3}\) | \(3.4 \times 10^{-3}\) | \(3.8 \times 10^{-3}\) | \(4.9 \times 10^{-8}\) |
Sharpe Ratio | 10.626 | 1.141 | 2.057 | 2.291 | \(-2291164.972\) |
Max Drawdown | \(-1.13 \times 10^{-7}\) | \(-0.0123\) | \(-0.00775\) | \(-0.00531\) | \(-0.156\) |
