Short-term risk in Axioma’s global multi-asset class model portfolio jumped 0.72% to 4.22% as of Friday, January 31, 2020, driven by a surge in share-price variation. Standalone equity-factor volatility rose 1.5 percentage points to 8%, which translated into a 0.75% rise in total portfolio risk. A less negative correlation between stock-market and exchange-rate returns also added to overall volatility. However, much of this was offset by a more inverse relationship between share and bond prices, driven by the current flight-to-safety environment. The latter meant that sovereign bonds and US investment-grade corporate debt now actively reduced total risk, alongside the JPY cash holding. The equity buckets, on the other hand, saw their combined share of overall volatility surge 12 percentage points to 90%.
Please refer to figures 7-10 of the current Multi-Asset Class Risk Monitor (dated January 31, 2020) for further details.