Nearly a flat week, down a tenth of a percent. Still barely holding onto gains for the year. Volatility is falling. Correlations seem to be acting more normal, more negative again.
The portfolio is moving back into “risky” assets. While asset volatility did fall, the portfolio reacted more to the assets beginning to show negative correlation again. When assets are negatively correlated, they should mostly cancel each other out, protecting against portfolio downside risk. Cash shows up to protect the portfolio when correlations no longer shield against losses. They should provide more protection now, so the strategy lightens up on cash. On April 3rd, 2020, the strategy rebalanced to:
18% SPY , 28% TLT , 9% GLD , 45% Cash
Very interesting blog, thank you.
What do you use as expected returns, I guess variance/correlations are backward-looking.
Thanks