Appendix D. Modern Portfolio Theory and Managed Futures
Earlier, we mentioned that Jerry Parker does it a little differently. Parker, like many other traders, pursues a strategy for clients based on Modern Portfolio Theory. What do we mean?
In mathematics you don’t understand things. You just get used to them. | ||
| --Johann von Neumann | ||
All trend followers have an extremely low to zero correlation with traditional investments, such as the S&P stock index. The case can be made that beyond achieving absolute returns, Trend Following also provides additional diversification to traditional portfolios.
This concept is called Modern Portfolio Theory (MPT). A traditional portfolio is typically 60 percent stocks and 40 percent bonds. What Modern Portfolio Theory ...
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