Although trading in futures may be highly volatile and risky, the concept of non-correlation suggests that adding managed futures as a component to a diversified investment portfolio may actually decrease volatility and increase returns in a portfolio as a whole.
The table to the right compares the correlations between managed futures, stocks and bonds for the period of 1980 through 2005.
Another way to evaluate the relationship between managed futures and stocks is to consider the frequency with which they move, or do not move, in the same direction.
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In nearly 50% of those months managed futures moved opposite from stocks. |
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In 35% of those months both managed futures and stocks posted positive returns. |
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In 17% of those months both managed futures and stocks move lower. |
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Correlation Analysis
(January 1980 - December 2005)
| |
Managed Futures |
U.S. Stocks |
U.S. Bonds |
| Managed Futures |
1.00 |
-0.10 |
0.12 |
| U.S. Stocks |
|
1.00 |
0.22 |
| U.S. Bonds |
|
|
1.00 |
Direction of Returns
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Investing in managed futures is speculative, involves a high degree of risk, and is not suitable for all investors.
Past performance is not necessarily indicative of future results. (Source Data) |
