Thursday, April 3, 2014

Do You Need Commodities in Your Portfolio?

Diversification remains the cornerstone of modern portfolio theory.  Yet, during the financial crisis many "diversifying” investments readily followed the direction of the equity markets as they collapsed in 2008 and 2009. By contrast, our Super Commodity Strategies have just obtained their best results in 2008 thanks to the volatility of the period, the high diversification and the construction model that makes them independent of equity and bond markets.

Our goal is to generates significant medium term capital growth with simple and strict risk trading rules and with maximum possible diversification. All our Portfolio Strategies are designed assembled and managed with this philosophy. Due to the high diversification that characterizes them, our Super Commodity Strategies enhance the positive synergies of individual Strategies which are composed and dramatically reduce the overall risk. See more.

The main benefit of adding managed futures on commodities to a balanced portfolio is the potential to decrease portfolio volatility. Risk reduction is possible because managed futures can trade across a wide range of global markets that have virtually no long-term correlation to most traditional asset classes. Moreover, managed futures funds generally perform well during adverse economic or market conditions for stocks and bonds, thereby providing excellent downside protection in most portfolios. While managed futures can decrease portfolio risk, they can also simultaneously enhance overall portfolio performance. The following chart illustrates that adding managed futures to a traditional portfolio improves overall investment quality while also potentially reducing risk.

Managed futures are highly flexible on many regulated financial and commodity markets around the world. By broadly diversifying across global markets, managed futures can simultaneously profit from price changes in stock, bond, currency and money markets, as well as from diverse commodity markets having virtually no correlation to traditional asset classes.
Managed futures can generate profit in both increasing or decreasing markets due to the their ability to go long (buy) futures positions in anticipation of rising markets or go short (sell) futures positions in anticipation of falling markets. Moreover, managed futures are able to go long or short with equal ease. This ability, coupled with their virtual non-correlation with most traditional asset classes, have resulted in managed futures funds performing well relative to traditional asset classes during adverse conditions for stocks and bonds.

Drawdowns, or the reduction a fund might experience during a market retrenchment, are an inevitable part of any investment. However, because managed futures trading advisors can go long or short – and typically adhere to strict stop-loss limits – managed futures funds have limited their drawdowns more effectively than many other investments. As the following chart shows, drawdowns for managed futures have been less steep than those for major global equity indices. Additionally, managed futures generall have shorter recovery times from drawdown periods. This is due in part to the ability to use short trading to take advantage of falling markets, as well as the fact that managed futures often have lower losses to recover.
massima-diversificazione-del-rischio The diversification between assets The diversification between assets that have low correlation between them improves the overall performance of our investments for the same risk, thus reducing our exposure to risk decreases as the so-called "specified risk" linked to a single class of financial products. Basically, if you only held the shares, the result of your trading / investment is overly tied to the fortunes of a particular financial instrument for which you are running too high a risk. A well-diversified portfolio asset class is one of the major components that create the optimal portfolio. Read "The Art Of Asset Allocation" and "Top 10 Rules Of Portfolio Diversification".

Diversification within an asset Concentrating investments in individual products or securities, you are exposed to a type of risk that can not be controlled, and the risk becomes uncertainty, which is something that is incalculable. is possible, even in this case, reduce the specific risks by trading or investing, for example, not a single product but a basket of products that represents a very large share of the market.
The diversification of the trading system parameters Is to use, within the same trading system, of different sets of parameters. Assuming that a trading account manage an adequate capital for diversification, it is better to diversify sets of parameters rather than making multiple contracts with the same set of parameters. The diversification of the set of parameters helps to minimize risk and strengthen our ability to remain disciplined and consistent psychological application of the trading system.

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