I’ve talked a lot about how stock/bond return correlations (more specifically, the assumption of a *negative* return correlation) are the basis for 60/40 portfolios and, ultimately, for strats like risk parity.

I’ve also talked a lot about how paying “2 and 20” to “rockstar” hedgies is probably a decidedly poor idea.

Now here’s a Heisenberg challenge: combine the two concepts mentioned above and see if you can figure out why I find the following set of charts to be particularly amusing…

(Charts: Goldman)

Isn’t the idea of risk parity to spread out the stock (more risk) and the bond (less risk). In that case it looks as if it isn’t working. If I am wrong, please explain.