HomeTechniques and TipsCorrelation in @RISKLimit on Correlated Variables?

5.2. Limit on Correlated Variables?

Applies to: @RISK 5.x–7.x

How many input distributions can correlate?  Is there a limit to the size of my correlation matrix?

There is no fixed limit. However, as with all other aspects of modeling, your available system resources are a constraint.

Note on Excel 2003, with @RISK 6.3 and older:
Excel 2003 workbooks are limited to 256 rows. You can still have larger correlation matrices, but you have to use special techniques; see Correlation Matrix Exceeds Excel's Column Limit. This does not apply to newer versions of @RISK, because they require Excel 2007 or newer.

Recommendation: If possible, don't have one huge matrix, but partition your correlation into smaller matrices. For example, suppose you have 400 inputs that are correlated. A 400×400 matrix is 160,000 cells. But if those 400 inputs actually fall into four groups of about 100 each, and there's correlation within each group but not between the groups, then you should use four 100×100 matrices, for a total of 40,000 cells. @RISK can test the smaller matrices for validity and, if necessary, adjust them much faster than one large matrix. If all 400 variables really do need to be correlated with each other, you need that larger matrix. But if you can group the variables as described, it's worth having a separate correlation matrix for each group.

Recommendation: If you have several groups of variables that all need the same correlations within the group, they can all use he same smaller matrix. Follow the technique in Same Correlation Coefficients for Several Groups of Inputs. A typical example is time periods or geographical regions where a number of factors are correlated in the same way, but there's no correlation between periods or between regions.

Last edited: 2016-08-30

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