I've been trying to understand the tool as well with no much success. My RG is 77. I've tried to rebalance allocations on the portfolio and the number would barely change...I even tried adding REITs, known as well diversifiers, and the RG won't move from 77...although the diversification benefit moves from 15 to 17.

Correlations are not static and move over time, so it would be interesting to know what data they use on their correlations...and more importantly, how they go about calculating the correlation of two different mutual funds...do they use the M* category and then historical correlation data? current data?  

Certainly interesting. Would love to have more information about it.

Just my opinion. 

JC