Tag Archives: portfolio diversification
The correlation between the 60/40 strategic allocation and the equity market in the last 30 years is close to 0.9. Actually, portfolio risk, as measured by maximum drawdown, has only been low during strong equity market uptrends.
The holiday-shortened week marked a significant change in asset performance with gold outperforming technology on a year-to-date basis. This impacts diversified portfolios.
The anti-correlation between SPY and TLT persists while the correlation between SPY and UUP is now neutral.
Stock indexes are flat this year so far but biotech, gold, real estate and bonds are already generating high returns. Investors are diversifying but risks are increasing.
Distances from the 200-day moving average and from a 250-day high of major stock indexes. RSI(14) and YTD return of key proxy ETFs.
The low correlations between stocks and bonds, currencies, precious metals and commodities offer opportunities for diversification in 2014 but high risks lurk in case these markets couple again.