Robeco pioneered low-volatility investing. In theory stocks with low risk should also give low returns, but in practice the relation between risk and return turns out to be flat, or even inverted. Based on this finding we introduced our “Conservative Equities” funds which specifically target low-risk stocks.
An important question for low-risk investors is whether they should only buy stocks which have a low risk when viewed in isolation, or whether they should also include stocks which, on a stand-alone basis, have higher risk, but which help to reduce risk at the portfolio level because of their low correlations with other stocks. In this internship we want to take a deep dive into the role of correlations for low-volatility investors.
Literature: Blitz & van Vliet, “The Volatility Effect: Lower Risk Without Lower Return”, Journal of Portfolio Management, 2007.