Cavalier Funds Represent a Flexible Array of Tactical Solutions
During periods when investment results are positive it is favorable to have portfolios that correlate to the market. We would consider this result to be “highly correlated” to the market benchmark. When investment results trend downward and markets losses occur, it is more attractive to have investment strategies that adapt and protect against loss of wealth. We would consider results from those strategies to be “lowly correlated” to their benchmark. In contrast to both of those scenarios, a strategy that experiences positive results when markets are trending downward would be considered “inversely correlated” to the benchmark.
At Cavalier Investments, we apply a concept known as adaptive correlation to take advantage of just such correlation variabilities in the market. Adaptive correlation involves the dynamic rebalancing of investments that target benchmark returns in up markets, while still seeking to protect against loss in down markets.