There is an old and often cited Latin adage, “Si vis pacem, para bellum” which we can loosely translate as “If you want peace, prepare for war“. While this term comes from military and politics, we can see its wisdom in portfolio management – if we want to profit as traders/investors in the long term, we must know how to manage risks during long bear markets and short-term crises.
Currently, the stocks indexes around the world are close to all-time highs, and an optimistic mood is in the air. Corona crisis is nearly forgotten (at least financial markets act as if nothing had happened), but there will be a crisis at some time in the future. And it’s better to prepare for the worst during calm periods than to look for quick help under stress in volatile times. Therefore, we have prepared a new report for our Quantpedia Pro clients, which allows you to pick any asset, trading strategy or a mix of assets/factors into your model portfolio and find a trading strategy that works as a Crisis Hedge during negative months or bear markets. How does it work?
We split this report into two sections – negative months hedges and bear markets hedges:
The first section helps you to identify periods when your model portfolio experienced negative monthly performance, shows performance distribution during these periods and then suggests 5 trading strategies with the lowest downside correlation that can act as a short-term Crisis Hedge.
The second section helps you to identify periods when your model portfolio experienced bear markets, defined as periods during which the equity curve is under the 12-month moving average. The report then shows performance distribution and suggests 5 trading strategies with the lowest downside correlation that can act as a Crisis Hedge in bear markets.
So don’t get caught up, but build any model portfolio – equity-centric, heavy on commodities or bonds, tilted to cryptocurrencies, or upload your own equity curves. And then, you can quickly analyze your downside risks and look for possible Crisis Hedge solutions.
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