How much variance do the first 3 PCs explain for interest rates?

For yield curves, PC1 (level) typically explains 80-90% of variance, PC2 (slope) 5-10%, PC3 (curvature) 2-5%. Together they explain 95-99% of all rate movements.

How do you rotate PCA factors for interpretability?

Varimax rotation maximizes variance of squared loadings within factors, creating more interpretable sparse loading structure. Other rotations include quartimax, equamax, and oblique methods.

PCA Factor Extraction for Return Data Calculator

Extract principal component factors from historical return data using eigendecomposition of the covariance matrix. The first PC explains parallel shifts; subsequent PCs explain tilt and curvature.

Use the full interactive calculator below, or

Related Calculators

Factor Risk Decomposition

Finance Ultra-depth

Sparse Portfolio L1

Finance Ultra-depth

DCC-GARCH Correlation

Finance Ultra-depth

PCA Factor Extraction for Return Data Calculator

Related Calculators

Frequently Asked Questions

How much variance do the first 3 PCs explain for interest rates?

How do you rotate PCA factors for interpretability?