Doubling risk from 15 vol to 30 vol needs 675bp outperformance, Andy Constan notes

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1 hour ago

Doubling risk from 15 vol to 30 vol needs 675bp outperformance, Andy Constan notes — Volatility increase demands higher returns

Andy Constan, founder / strategist at Damped Spring Macro, discusses the relationship between portfolio risk and required returns. Constan explains that investors running at 15 vol risk only need a modest return above cash, achievable with unlevered SPX exposure. However, increasing portfolio volatility to 30 vol requires an outperformance of 675 basis points, or 9% minus 2.25%, over SPX to reach risk-adjusted breakeven.

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Constan has examined challenges facing investors in other areas. He previously highlighted the difficulties for investors with long BTC and MSTR positions during a sharp downturn, raising questions about risk metrics in these trades (Long BTC and MSTR trades). In another note, he pointed to the overlooked impact of ongoing share issuances to employees in debates over Goog's equity raises (Goog share distribution history).

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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