Risk Budgeting Across Equities, Bonds and Alternatives
Risk budgeting is a useful lens for understanding volatility, correlation and diversification. Risk budgeting allocates capital based on each asset's contribution to portfolio volatility rather than by market value. The approach can improve diversification, but it depends on stable correlations and reliable volatility estimates.
Why it matters for portfolios
Diversification is only as good as the correlation assumptions behind it; stress testing is essential.
What to watch
correlation regimes, realized volatility, liquidity and leverage costs
This article is for educational purposes only and does not constitute investment advice.