Kenneth,Originally Posted by Kenneth K
I agree with you on this point.
The concept of bounding is implicit in my posting; my lookback was of ~100d or so. If the results here become the boundary of expectations in the present market climate, and if further risk management (entry at 1/3 RR, stops based on pivots, etc.) gives us the suggestion that we will be bounded by the "worse-case" results presented (e.g., risk management improves performance and/or reduces risk), then I think we can have a reasonable expectation of outperforming the boundary going forward.
My conclusions on allocation were simply to suggest that there is an allocation which represents, in the present market climate, a configuration that reduces volatility of an entire portfolio that is comprised of two trading instruments. I think we can agree that if holding 100% IWM, we have a reasonable expectation that the volatility will be lower than holding 100% GDX. If the last 100d of actual returns and volatility represents the next few days/weeks (forward looking) of expected returns and expected volatility, then I think my conclusions are not too far from the mark, independent of whether you are holding IWM, GDX, or a mixture of both.
Kind regards,
pgd
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