Ep. 1027: Performance Data with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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The Performance of a Portfolio Holding Berkshire Shares
The correlation between the two return streams is zero. Despite the overall similarity of returns, the paths to producing these returns have nothing in common. With 50 % each in berkshire and drury raised the risk adjusted rate of return to a level higher than either could achieve individually. For the holder of berkshire, the diversification reduced the portfolio volatility by almost one third. It also reduced the depth of the peak to trough drawdown by almost half. And it cut the length of the drawdown associated with holding berkshire alone by wopping forty three months.
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