Tag: risk parity

A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 2)

In Part 1, and Part 1.5 I introduced a simple 2-asset portfolio that substantially outperformed the SPY ETF since 2009. In Part 1 I examined the performance of an "inverse risk-parity" approach where the ETF with the largest volatility contribution to the portfolio was weighted more heavily. In Part 1.5 I examined the performance of the actual "risk-parity" approach, where the ETF with the smallest volatility contribution is weighted more heavily. In this post I will examine some of the conceptu

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A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 1.5)

In Part 1 of this series I shared a simple strategy which showed outsized performance relative to the SPY ETF since 2009. I made a small error in the implementation. The previous portfolio was not rebalanced according to a risk-parity framework. It was actually the inverse. The strategy was rebalanced such that the ETF responsible for the highest percentage of the portfolio's volatility was weighted more heavily! Surprisingly this error did nothing to substantially alter the performance of the p

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A Dead Simple 2-Asset Portfolio that Crushes the S&P500 (Part 1)

I'm going to share a portfolio with you that has absolutely annihilated the performance of the market (as proxied by SPY) since the recovery began in 2009*. The strategy has not had a down year since. This portfolio maintains constant exposure, has 1 un-optimized parameter and wins on a risk-adjusted basis even after considering reasonable transaction costs. I can't claim credit for the general idea. I found it in the comments section while reading a SeekingAlpha article written by Jonathan Kin

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Was David Woo Right; Was the Selloff Exacerbated by Risk Parity Strategies?

Today after the close Bloomberg TV had David Woo, Managing Director and Head of Global Rates and Currencies Research at Bank of America/Merrill Lynch, on to provide some insight regarding recent market action. More specifically, he addressed how Chinese and American markets are linked. He dropped a lot of gems during his segment but one point really struck a chord with me. He said that the recent selloff has likely been exacerbated by "Risk Parity Guys". If you're unfamiliar with 'risk parity'

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