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Key Ideas
- Volatility is usually seen as something bad, as the enemy of long-term performance; but the insights it provides may actually make it more of a tool that can be used to help strengthen portfolio resilience.
- Volatility’s historical relationship with market drawdowns may offer an effective rebalancing signal, and its greater persistency than past returns at the security level may help strengthen portfolio construction.
- These insights can be applied through a dynamic adaptive strategy that may help reduce risk exposure in difficult equity markets while strengthening long-term return potential.
