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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Dataminer1 who wrote (7882)	7/3/1999 2:43:00 PM
From: Dr. Id	Respond to of 18928

Got me thinking that if you could find 2 equities that move exactly opposite of each other, only one cash reserve would be needed, and even then it could be small since the selling in 1 would be funding the cash for the other. Any thoughts? In theory, it sounds right. However, when you find those two equities, let us know! (In other words, timing the market sounds great in theory also, but is impossible to do with any consistency. You might find two equities that track opposite for a short period, but I can't imagine investing over any period of time based on the idea that they will continue to do so). Jeff

To: Dataminer1 who wrote (7882)	7/4/1999 1:21:00 AM
From: Dave Van Rensselaer	Read Replies (1) \| Respond to of 18928

D1, I like SCH vs. KEA for a whopping 0.160 correlation the past 11 yrs. Where as investors use health vs. financial funds for a correlation of 0.735 which is high. FSVLX vs. FSPHX is lower at 0.589 and FHLSX vs FSFSX is 0.673. Perfect correlation is 1.00 like Vanguard Index 500 (VFINX) vs. SP-500. All the funds above annualize between 23 and 24.7 percent. KEA annualized is 41.2 and SCH 66.5 percent. All above funds and stocks are measure for 11 yrs. I want stocks that are inversely correlated to a certain degree to reduce my MMkt holdings. But, I want the nice alpha, too... great annualized earnings. Since inception on 6/3/98, the hedge fund, USPIX has lost... an annualized -84.44 percent. I hold KEA and SCH now and think this low correlation and high annualized earnings will continue. I believe they also, fit nicely toward the bottom of my pyrimid. DaveV

To: Dataminer1 who wrote (7882)	7/6/1999 8:13:00 AM
From: OldAIMGuy	Respond to of 18928

Hi Bill, I also had some correspondence on this same subject back about a year ago with the advent of Profunds and also discussion on the Rydex funds. The problem with trying to balance a bull and bear fund comes with the concept of nearly 18 years of straight bull market! As with any hedging strategy, part of the portfolio wins while part loses. I did better (on paper) when I tried using AIM to get some balance with US and foreign currencies. The idea here is to have a currency shift in a long pendulum cycle. One starts by loading up on the under-valued currency. Using AIM's advice, one sells the initial currency (the "equity") as it strengthens and transfers the value to the US currency. Then when the US currency strengthens against the foreign currency, with AIM's advice, we repurchase the foreign money with our "strong" US dollars. I had planned on using short term bonds on both sides as the "equity" and "cash" for the balancing act. In this way, we'd get some yield as well as the valuation shift as we wait out the relatively long currency cycles. If you take a look at the Yen VS Dollar for about a decade, you will see where I was heading with this study. Best regards, Tom