Power of uncorrelated strategies

The only Free lunch!!

Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes, but I get some surprise that pushes my limit a little farther. Charlie Munger

I can say this exact same statement for the power of uncorrelated strategies. Not an year goes by when I don’t get positively surprised with sheer contrast of numbers. See this financial year numbers to understand what I am saying.

This year, Nifty did OK with 28% return with a 6% drawdown

Bse Smallcap index did almost double of that with 12% draw down

It was a great year for the Bitcoin which generated a return of 150+%

Gold was consistent due to last leg surge to close at 10% returns with around 8% drawdowns.

And Now lets have a look at creating a Combo strategy and see how it fared. Now ofcourse , we need to create a BARBELL by allocating the least to the most volatile asset class.

The combo we are testing is 30% Nifty, 30% BSE smallcap, 30% Gold and 10% Bitcoin. What do you think would be the result.

Max DD of 4%. Are you kidding me. I do not know anybody in my circle who would chicken out and throw in the towel at 4% drawdown.

This is how you ensure zero behavior gaps. Barbell + uncorrelation.

comments are welcome.