Bond/Stock Correlation: A Quantitative Headwind for Asset Allocation Strategies

Up until a few months ago I was trading an asset allocation strategy that invested significantly in bonds and large cap US stocks. I exited that strategy because the correlation between bond and stock returns concerned me.

In this article Lucena CTO Tucker Balch, Ph.D. explains why anti-correlated return works and how to measure this behavior quantitatively using a scatter plot.

Read the article on the augmented trader.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>