Now Reading: WhiteOak study shows how asset classes can reduce portfolio risk
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WhiteOak study shows how asset classes can reduce portfolio risk
WhiteOak study shows how asset classes can reduce portfolio risk
A study by WhiteOak Capital Mutual Fund shows that Indian equity, gold, debt, and US equity have historically had varying degrees of correlation, offering investors a way to build a more resilient…
A study by WhiteOak Capital Mutual Fund shows that Indian equity, gold, debt, and US equity have historically had varying degrees of correlation, offering investors a way to build a more resilient portfolio. The data covers annual returns from January 2010 to August 2026.
Indian equity and US equity have the highest positive correlation at 0.37, meaning they tend to move together. Indian equity and gold have the lowest correlation at -0.43, indicating they often move in opposite directions. Gold and US equity show almost no correlation at 0.01.
For an all-equity investor, adding gold and debt can reduce risk, as those assets have historically behaved differently. The study advises combining assets with low or negative correlation to avoid having the entire portfolio fall during a downturn. Investors should consult a SEBI-registered advisor before making decisions.
Indian Opinion Analysis
The correlation figures highlight a basic portfolio construction principle: holding many stocks in one market is not true diversification. During a broad equity sell-off, nearly all stocks fall together, so the protection comes from mixing asset classes that respond to different economic drivers. The negative correlation between Indian equity and gold reflects gold's role as a store of value when risk appetite drops, while debt offers stability through fixed returns. For an Indian investor, US equity adds a currency and growth diversification layer, though its positive correlation with domestic equity means it offers less protection during a global rout. The next step for an investor is to align this historical correlation data with their own horizon and risk tolerance before rebalancing.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
