US weekly portfolio recommendation (from 4 to 8, April 2011)

The low volatility portfolio recommended for this week is (ticker notation):

    'MO'    'AMGN'    'BCR'    'BDX'    'CVS'    'CPB'    'CLX'    'ED'

    '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 four weeks, and then rebalance with the new composition.

The main difference respect to the last-month portfolio composition is the purchase of ‘CLX’. The turnover from last month is 9% (due to the portfolio growth and the purchase of that 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 2.5% (versus 4.2% of the S&P 500).

The last year annualized Sharpe ratio of the low-vol strategy was 1.40 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the S&P 500 was 0.86 over the same period.

The next graph shows the risk-return space for the two considered portfolios.

Each blue point represents the mean return and volatility of the low-vol portfolio over the past 52 weeks. On the other hand, each red point represents the mean return and volatility of the S&P 500 index over the same 52 past weeks.

We can see the low-vol portfolio has a mean return very similar to that of the S&P 500, but its volatility is much better.

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 (60% 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.

Spain weekly portfolio recommendation (from 4 to 8, April 2011)

The low volatility portfolio recommended for this week is (ticker notation):

    'ACS'    'EBRO'    'ENG'    'IDR'    'ITX'    'REE'   'TEF'

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for four weeks, and then rebalance with the new composition.

There is no difference respect to the last-month portfolio composition. The turnover from last month is 3% (due to the portfolio growth).

Regarding the performance, over the last year (52 weeks), the strategy attained a volatility of 18% (versus 28% of the IBEX35).

The weekly 95%-VaR was 4.0% (versus 5.2% of the IBEX35).

The last year annualized Sharpe ratio of the low-vol strategy was 0.60 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the IBEX35 was 0.03 over the same period.

The next graph shows the risk-return space for the two considered portfolios.

Each blue point represents the mean return and volatility of the low-vol portfolio over the past 52 weeks. On the other hand, each red point represents the mean return and volatility of the IBEX35 index over the same 52 past weeks.

We can see the low-vol portfolio has a higher mean return than that of the IBEX35, and its volatility is also better.

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 always a higher return than that of the IBEX35. Moreover, the volatility of the low-vol portfolio was always less than that of the IBEX35.

As a summary, the low-volatility strategy dominates the market index most of the time, showing it attains consistently better risk-adjusted returns.

US weekly portfolio recommendation (from 28 March to 1 April, 2011)

The low volatility portfolio recommended for this week is (ticker notation):

   'ABT'  'MO'    'AMGN'    'BCR'    'BDX'    'CVS'    'CPB'   'CLX'

   'ED'    '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 four weeks, and then rebalance with the new composition.

The main difference respect to the last portfolio composition is the purchase of ‘ABT’ and ‘CLX’. The turnover from last month is 17% (due to the portfolio growth in the last month and the purchase of those companies).

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 1.36 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the S&P 500 was 0.82 over the same period.

Using a 52-weeks historical method over the last year, the low-vol portfolio attained a higher return (70% 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.

I have omitted more details regarding the persistence of these conclusions over a longer history because they are roughly the same as those in the previous posts.

As a summary, the low-volatility strategy dominates the market index (70% of the time over the last year), showing it attains consistently better risk-adjusted returns.

Spain weekly portfolio recommendation (from 28 March to 1 April, 2011)

The low volatility portfolio recommended for this week is (ticker notation):

    'ACS'    'EBRO'    'ENG'    'IDR'    'ITX'    'REE'   'TEF'

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for four weeks, and then rebalance with the new composition.

There is no difference in the portfolio composition respect to that of the last month. For this reason, the turnover from last month is only 2.7% (due to the portfolio growth in the last four weeks).

Regarding the performance, over the last year (52 weeks), the strategy attained a volatility of 18% (versus 28% of the IBEX35).

The weekly 95%-VaR was 4.0% (versus 5.2% of the IBEX35).

The last year annualized Sharpe ratio of the low vol strategy was 0.50 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the IBEX35 was 0.05 over the same period.

Using a 52-weeks historical method over the last year, the low-vol portfolio attained always a higher mean return than that of the IBEX35. Moreover, the volatility of the low-vol portfolio was always less than that of the IBEX35.

I have omitted more details regarding the persistence of these conclusions over a longer history because they are roughly the same as those in the previous posts.

As a summary, the low-volatility strategy dominates the market index (always, and over the last year), showing it attains consistently better risk-adjusted returns.

US weekly portfolio recommendation (from 21 to 25, March 2011)

The low volatility portfolio recommended for this week is (ticker notation):

    'MO'    'AMGN'    'BCR'    'BDX'    'CVS'    'CPB'    'ED'    '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 four weeks, and then rebalance with the new composition.

The main difference respect to the last portfolio composition is the sale of ‘ABT’. The turnover from last month is 10% (due to the portfolio growth in the last month and the sale of that company).

Regarding the performance, over the last year (52 weeks), the strategy attained a volatility of 10% (versus 16% 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 1.37 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the S&P 500 was 0.71 over the same period.

Using a 52-weeks historical method over the last year, the low-vol portfolio attained a higher return (70% 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.

I have omitted more details regarding the persistence of these conclusions over a longer history because they are roughly the same as those in the previous posts.

As a summary, the low-volatility strategy dominates the market index (70% of the time over the last year), showing it attains consistently better risk-adjusted returns.