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Combining Risk-Managed Equities and Managed Futures – II

Do you need risk management for equities in a diversified portfolio?

Nicolas Rabener
10 min read
6 Apr 2025

SUMMARY

  • Risk managing equities increases Sharpe ratios, but can decrease returns
  • Taxation and expected returns matter
  • However, the choice of diversification strategy likely matters more

INTRODUCTION

In November 2024, we published a research article exploring whether investors should apply risk management to their equity allocation within a diversified portfolio. The proposed risk-management framework utilized a straightforward trend-following strategy, shifting from equities to cash when the stock market’s one-year rolling return turned negative (read Risk-Managed Equity Exposure II

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