Page 3 - Strategy Flipbook v.2_Classical
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Weather and Markets

In many ways, the volatile conditions of the financial markets are analogous to the
vagaries of the weather. Most of the time, we see outcomes of a certain range but
periodically, we are forced to deal with extreme conditions. When confronted with
uncomfortable weather conditions, we use a thermostat to maintain a stable and
consistent indoor environment that makes adjustments according to the outdoor
temperature.
In the financial markets, which fluctuate constantly, effective risk and portfolio
management require a similar thermostat process that will create and manage the
optimal combination of securities needed to maintain portfolio stability throughout
changing market conditions.
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