Tue, May 23, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

How to Develop an Uncorrelated Managed Futures Portfolio

Friday, January 13, 2012

Part One of a Five Part Series

The holy grail of investing is to develop an investment vehicle that operates during a variety of market environments.  In this article, we are going to discuss the first key to developing an uncorrelated managed futures portfolio: recognizing performance drivers.

In this article we are going to address a very basic concept: recognizing the macro performance driver.

When investing in stocks, for instance, many micro factors can influence a stock's price: earnings, management changes, distribution problems, legal issues are just a few examples of the many factors associated with the individual stock that can influence a stock price.  For our purposes, however, these individual factors are not of concern, but rather the macro performance driver.  On a macro level, stocks are generally driven by economic strength.  When the perception of economic strength is intact, stocks in general are likely to experience a positive market environment - and when the market environment turns negative, stock values can fall in unison.  This is particularly the case during a credit or debt crisis, when "most assets correlate to one." It is this period of crisis that should be a primary concern for designing the uncorrelated portfolio, a period of systematic risk that Nobel Prize winner William Sharpe has said is the reason it is impossible to "diversify" a portfolio with different stocks.

The problem with most investments is they are primarily driven at a macro level by economic strength.  Stocks, real estate, long only commodities are all examples of investments that primarily benefit from economic prosperity and suffer during times of economic stress.

Understanding the macro performance driver of most investments is the key to developing the uncorrelated portfolio.  In the next Opalesque Futures Strategies, released at the end of this month, we will review the various macro performance drivers in managed futures and demonstrate how to develop an uncorrelated investment portfolio that depends not on economic strength, but rather the market environments of price persistence, price dislocation and volatility.



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Time to invest in robotics? (part 1)[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The London-based, Swiss-born manager of the RoboCap UCITS Fund, talks to Opalesque about investing

  2. Investing - Hedge funds have been selling big winners this year, Hedge funds are betting $1 billion that Snapchat shares are going to drop, Here are the biggest bets made by top hedge funds in the first quarter[more]

    Hedge funds have been selling big winners this year From CNBC.com: Hedge fund managers' most popular stock to start the year has been a familiar name that is falling short in terms of performance, while the least popular companies all have been crushing the market. Procter & Gamble

  3. Investing - Third Point's Loeb surfs on as hedge fund washout continues, George Soros has added to his losing bets against the stock market, Hedge funds, VCs and the CIA are throwing money at ex-Bridgewater data scientists' startup, Hedge funds shed retail amid fears of "apocalypse"[more]

    Third Point's Loeb surfs on as hedge fund washout continues From Reuters/Nasdaq.com: Billionaire investor Daniel Loeb said on Thursday that he is still making money even as the hedge fund industry struggles. Loeb, who oversees the $16 billion hedge fund firm Third Point LLC, sa

  4. Investing - Tudor Jones backs AI hedge funds, Massive hedge fund trades highlight insider buying: GE, Pentair, Tempur Sealy, Apollo Global and more, Hedge funds big wigs are buying consumer and selling tech, here's the stocks[more]

    Tudor Jones backs AI hedge funds From FT.com: Hedge fund magnate Paul Tudor Jones has invested in a brace of artificial-intelligence powered "quantitative" hedge funds, underscoring the increasing acceptance that the industry will need to turn more to technology and away from traditional

  5. Opalesque Roundtable: Rise of high-frequency trading in Europe a challenge for traditional asset managers[more]

    Komfie Manalo, Opalesque Asia: The rise of high-frequency trading in Europe, dominating over 80% of the market, has become a challenge for traditional asset managers especially when it comes to risk management, said Philippe Malaise, chairman of advisory firm