Tactical versus Strategic Exposure
SUMMARY
INTRODUCTION
Strategies like Value or Momentum are like staples that deserve a permanent allocation in investors portfolios. In contrast, other strategies are more like sunscreen, which is mainly used tactically to minimize the risk of getting a sunburn when going to the beach. Statistical arbitrage is a strategy that is likely more interesting on a tactical than strategic basis as returns are only attractive when volatility is high. In this short research note we will investigate statistical arbitrage across markets and the utilization as a tactical strategy for hedging equity portfolios (read Statistical Arbitrage in the US).