'MO' 'AMGN' 'AON' 'BCR' 'BDX' 'CVS' 'CLX' 'ED'
'EW' 'FDO' 'GIS' 'HRL' 'JNJ' 'K' 'KMB' 'LH' 'MKC'
'MCD' 'PEP' 'PG' 'RAI' 'SO' 'WEC'
Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
The portfolio composition is very similar to that of previous quarter. Now, the stock is ‘LH’ has been added. The turnover is only 9.5% (due to the portfolio growth and the purchase of one company).
Regarding the performance, over the last year (52 weeks), the strategy attained a volatility of 10% (versus 17% of the S&P 500). The weekly 95%-VaR was 2.4% (versus 4.2% of the S&P 500).
The last year annualized Sharpe ratio of the low-vol strategy was 1.95 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the S&P 500 was 0.80 over the same period.
The next graph shows the risk-return space for the two considered portfolios.
We can see the low-vol portfolio has a better mean return than that of the S&P 500, and also its volatility is better. In this case, we say the low-vol portfolio dominates the index.
I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The low-vol portfolio attained a higher return (83% of the time) than that of the S&P 500. Moreover, the volatility of the low-vol portfolio was always less than that of the S&P 500.
As a summary, the low-volatility strategy dominates the market index most of the time, showing it attains consistently better risk-adjusted returns.
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