After reading the section on correlation between assets, it is my understanding that negatively correlated assets are considered a good thing since your standard deviation of returns for a portfolio will be lower and thus have a higher Sharpe ratio, all else equal.
In the section outlining “strategic asset allocation” it is stated that “in choosing asset classes for an account, the correlation of returns within an asset class should be relatively high , and the correlations of returns between asset classes should be relatively low in comparison”.
Why would a portfolio manager following a strategic asset allocation strategy want the correlation of returns within an asset class to be high? Would you want diversification within the actual asset class itself - an example being equities as an asset class. If I only invested in tech stocks for my equity asset class clearly I have a correlation of returns within that asset class closer to 1, and therefore, to my own understanding, have not done a good job effectively diversifying the portfolio. Why would you want high correlation within an asset class when you have a well balanced portfolio of stocks that aren’t correlated?