A.I.M. Users Bulletin Board

[ls7550]

Other than holding cash and short term bonds, how can you hedge a portfolio against market risk ( not individual stock risk ) when correlations go to 1.

Per $100,000 of portfolio what position ( and size ) would you put on.

I ask because right now I am using my AIM cash for short term weekly risky option trades. While I manage the risk of the individual options, if the whole market takes a dump I will not be a happy camper. I hope to have enough sense to let them expire at 5he propper time.

Hi Toofuzzy

My userid LS7550 originally years back was formed from Alfred Winslow Jones, one of the first 'hedge fund' manager/investor that followed a Long/Short 75/50 approach.

Not being in stock might be considered as a form of short stock, and gold can move counter direction to stocks, so one variation might be
this, 25% 2x stock (ULPIX), 25% 1x stock (SPY), 50% gold, which compared to just 100% SPY alone ...

Jan 2005 to recent (May 2021) 
 CAGR           Stdev	Best Year	Worst Year	Max. Drawdown	Sharpe Ratio 
 11.46% 	14.13%	32.28%	       -23.57%	        -32.12%    	    0.75 
 10.03% 	14.63%	32.31%	       -36.81%	        -50.80%    	    0.64 
  
 

Clive