Wednesday, March 13, 2013

T2 FX...3.13.13

Keeping in mind the risk management benefits or maintaining several diversified portfolios of non-correlated financial instruments, here's an update of the FX (foreign exchange, currency portfolio) previously discussed.
The outliers of GLD, SLV, XLE and SPY within the portfolio provide multiple active currency related benchmarks to help determine the relative momentum of the FX components versus commodities related financial instruments (GLD, SLV, XLE).
Given the inherent low beta of the pure FX ETFs we should expect lower returns and lower drawdowns with the entire portfolio relative to the SPY (with a top 2 sort) which is what we are seeing in the shorter time frames. 
A fuller understanding of this model's dynamics, and the inherent risk factors, will be the subject of tomorrow's post