Because I think I read in another thread that equities volatility has predictive value only for ca. 30 days. So you would need frequent rebalancing.Edit: I am using TLT beta here as shorthand for TLT SPY correlation. They're not the same, but very related, and if one is positive/negative, so is the other (mathematically).Another concern regarding your strategy is that you apparently assume that you can market-time correlated and anticorrelated equities/treasuries regimes. Any market timing is suspect. I think forum user hydromod showed that volatility extrapolation for example work only for very short forecasting timeframes. I suspect the same is true for correlations.
TLT expected beta correlates highly with recent TLT beta (so high/low beta regime is fairly predictable), if you look at a graph of it, I think you'll agree it is not controversial? Similar with volatility (you could infer vol prediction from VIX option chains in fact, very easy to see it highly correlates to current Vol for near future), shorter horizon is more accurate. But we only need near term prediction. Why do you think this is suspect?
Regarding TLT, I don't know. Please show data or charts. In my experience, it's hard to predict any market. I assume predicting TLT volatility is similar to predicting TLT, because volatility typically occurs with market crashes. I suspect if you try to time it, you may be fooled often - how do you want to know if we will have 18 years rising rates like 1964-1982, or if rates fall from 2023 onwards, or if rising and falling rates (and volatility) oscillate up and down for the next decade, as the fed keeps adjusting to flares of inflation and false inflation containment signals? How do you time the turning points? You try to catch a trend signal, which would work in a trending market, but then you lose a ton of money if the market oscillates for a long time. Show me your backtests, data, or evidence, and convince me that my suspicion is wrong.
Statistics: Posted by comeinvest — Mon Apr 08, 2024 2:56 am — Replies 3027 — Views 543738