Omega Point Blog | Volatility

Volatility 2021

Getting a Grip on Volatility

July 25, 2021

In our last two editions of Factor Spotlight, we explored volatility’s unprecedented post-COVID rally as well as its recent hints at renormalization. As the dust continues to settle, there are strong indications that suggest that low volatility stocks are coming back into favor while high volatility stocks might take a back seat. During this transitionary period, we have seen quite a bit of...

Kevin Wahlberg

ETFs Volatility 2021

The Factor Signature of Volatility

July 18, 2021

Volatility continues spiraling downwards as the factor seemingly marches back to the beat of its old drum. As we highlighted in last week’s Factor Spotlight, Volatility spent almost the whole of 2020 skyrocketing with positive performance; however, performance since February 2021 would show that the factor may be coming back down to earth.

Alyx Flournoy, CFA

ETFs Volatility 2021

Is Volatility’s Reign Coming to an End?

July 11, 2021

Volatility has spent almost the whole of 2020 terrorizing investor portfolios as it soared on a rocket ship of positive performance. From January 2020 to its peak in February 2021, we saw this factor rise by almost 20% on a cumulative basis.

Alyx Flournoy, CFA

Value Volatility 2020

If You Can't Tame Volatility, Can You at Least Time It?

September 13, 2020

Before we kick off this week’s issue, we encourage you to check out Newfound Research’s Flirting with Models podcast which recently featured Omega Point’s Omer Cedar in which he discusses: how quantitative investors have impacted markets, how fundamental managers should think about factors, the low-hanging fruit for optimization, and surprising lessons he has learned in evaluating...

Alyx Flournoy, CFA

Volatility 2020

You Can Run, But You Can’t Hide From Runaway Volatility

August 30, 2020

Last week we had focused on Volatility’s first major trend reversal since the Financial Crisis, adding its bullish 2020 turnaround to the growing list of unusual market behaviors we’ve seen in the COVID era. We compared sector drivers and correlations between today and 2009, and uncovered startling disparities alongside some remaining scraps of common ground. This week, we dig deeper into...

Alyx Flournoy, CFA

Volatility 2020

Volatility is Partying Like It's...2009?

August 23, 2020

Volatility has been on the run! For a factor that typically has abysmal performance and a very negative premia over time, Volatility is turning out to be 2020’s comeback kid. For all of the managers who actively tilt their portfolios away from this factor or manage ‘low volatility’ products, this recent trend from the Volatility factor could really be throwing a wrench into things.

Alyx Flournoy, CFA

Value Volatility Security Search 2020 Coronavirus

Hunting for Value in a Falling Market

March 08, 2020

Omer Cedar

Volatility 2019 Rebalancing

Better Portfolios Through Experimentation

December 08, 2019

We hope you enjoyed Thanksgiving weekend with your family while we took the week off from Factor Spotlight to do the same. Today, we’re excited to introduce our latest product feature - the Experiments Manager, which is now available for all Omega Point members. The utility of Experiments revolves around portfolio rebalancing, as it allows you to evaluate different “what-if” versions...

Omer Cedar

ETFs Hedging Volatility 2019 Technology

Building a Smarter Tech Hedge

November 03, 2019

Over the past couple of weeks, we’ve discussed the benefits of using a smarter hedge basket vs. the standard and ubiquitous ETF hedges that most portfolio managers use to some extent. Most recently, we built a higher Volatility basket out of the SPY constituents, through which a manager could have made an incremental +5.68% return per year over the traditional SPY hedge.

Omer Cedar

Hedging Volatility 2019 SPY

Building a Superior SPY Hedge

October 27, 2019

Last week, we discussed the significant drawbacks of using the S&P 500 SPDR (SPY) as a market exposure hedge. We established that 1) the SPY hedge is wildly common among the institutional investment community (40% of the SPY’s AUM is short interest), and 2) it carries an inherent long bet on Volatility - a negative premia factor that’s down 32% over the past five years.

Omer Cedar