By Mark Shore
My last article discussed the advantages of a traditional portfolio allocating to a volatility index. The article concluded that the allocation to VSTOXX® Futures may offer advantages for a traditional portfolio of 60 percent stocks and 40 percent bonds. This article asks a similar question, what if the portfolio was only European bonds; would the allocation to a volatility index such as the VSTOXX® Index offer added value to a bond portfolio?
Investors will often perceive each component of their portfolio as standalone investments. However, the components should be viewed for how well they complement the portfolio. Think of it is a holistic approach to portfolio management. My prior analysis of a 60/40 portfolio allocating to the VSTOXX® Index was more direct as the EURO STOXX 50® Index is the underlying market for the VSTOXX® volatility index. However this analysis of bonds to VSTOXX® is a little more intricate because the relationship of the two markets is not necessarily direct, but they are connected.
Liquidity is always important to an investor or trader. Table 1 gives readers an
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Copyright ©2015 Mark Shore. Contact Mark Shore for permission for republication at info@shorecapmgmt.com
Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments & conducts educational workshops.
www.shorecapmgmt.com email: info@shorecapmgmt.com
Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business, where he teaches the only known accredited managed futures course in the country. He is also a Board Member of the Arditti Center for Risk Management at DePaul University.
Past performance is not necessarily indicative of future results. There is risk of loss when investing in futures and options. Futures and options can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone. The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.
My last article discussed the advantages of a traditional portfolio allocating to a volatility index. The article concluded that the allocation to VSTOXX® Futures may offer advantages for a traditional portfolio of 60 percent stocks and 40 percent bonds. This article asks a similar question, what if the portfolio was only European bonds; would the allocation to a volatility index such as the VSTOXX® Index offer added value to a bond portfolio?
Investors will often perceive each component of their portfolio as standalone investments. However, the components should be viewed for how well they complement the portfolio. Think of it is a holistic approach to portfolio management. My prior analysis of a 60/40 portfolio allocating to the VSTOXX® Index was more direct as the EURO STOXX 50® Index is the underlying market for the VSTOXX® volatility index. However this analysis of bonds to VSTOXX® is a little more intricate because the relationship of the two markets is not necessarily direct, but they are connected.
Liquidity is always important to an investor or trader. Table 1 gives readers an
READ MORE
Follow Mark Shore on Twitter, Facebook and Linkedin
Copyright ©2015 Mark Shore. Contact Mark Shore for permission for republication at info@shorecapmgmt.com
Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments & conducts educational workshops.
www.shorecapmgmt.com email: info@shorecapmgmt.com
Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business, where he teaches the only known accredited managed futures course in the country. He is also a Board Member of the Arditti Center for Risk Management at DePaul University.
Past performance is not necessarily indicative of future results. There is risk of loss when investing in futures and options. Futures and options can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone. The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.
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