Asset Allocation Research – Defensive and safe haven assets: the winning combination
- Defensive stocks such as health care, infrastructure and consumer staples enhanced the portfolio risk/return ratio due to relatively low correlation to large caps.
- Safe haven assets such as sovereign bonds and gold have much lower correlation to large cap stocks than defensive stocks, allowing safe haven assets to improve the Sharpe ratio further.
- Defensive and safe haven assets can complement each other in a portfolio, maintaining volatility as low as the volatility of the safe haven asset whilst enhancing the return and boosting the portfolio Sharpe ratio to the highest of any portfolio analysed.
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ETF Securities Research team
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