Researchers try to fix “unreliable” hedge fund measures

``the Sharpe ratio and the Omega ratio assume that the investment in question is being made in isolation. Invariably, a hedge fund investment is added to a pre-existing portfolio, usually a “traditional” one (e.g. a “60/40″ stock/bond portfolio). So the correlation between the hedge fund and the existing portfolio is actually a critical factor. A fund with a 2% annual return might be a dog if it has a 100% correlation to your existing portfolio, but a total rock star if it has a perfectly negative correlation to your portfolio.''