Nick Baltas - Multi-Asset, Multi-Strategy Portfolios (S7E3)
Flirting with Models
Embrace the Uncorrelated
When facing market downturns, investors may hope for uncorrelated assets to perform, but they must recognize that these assets might not consistently provide shelter. Understanding this dynamic is crucial; uncorrelated investments might not always defend against losses, thus requiring a different approach. To effectively manage risk, investors should seek assets that have negative correlations with market declines. These defensive strategies serve as utility functions, balancing the desire for safety with the acceptance of potential costs, ultimately aiming for protection against adverse market conditions or enhanced yield.
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