Risk Parity (Multi-Asset ERC)
Risk-based sizing · Multi-asset · Daily
The rules, in plain English
Risk parity does not split money equally; it splits risk equally, so each asset in a multi-asset basket contributes the same amount of portfolio risk. Calmer assets therefore get larger weights than volatile ones. This version uses the equal-risk-contribution method across the basket.
The published backtest
| Total return | +84.5% |
|---|---|
| CAGR (annual growth rate) | +3.28% |
| Sharpe ratio | 0.16 |
| Maximum drawdown (worst peak-to-trough fall) | -35.6% |
| Win rate | 60.9% |
| Profit factor | 1.34 |
| Risk grade (our shorthand, from the published figures) | D |
| Asset class | Multi-asset |
| Style | Risk-based sizing |
| Timeframe | Daily |
| Type | Weights |
— means no figure was published for this strategy. Ungraded and workflow entries publish diagnostics rather than a graded portfolio backtest, so some metrics are not published for them.
Honest verdict
Modest
This one made money in its published backtest, but modestly for the risk taken — look at the Sharpe ratio and the worst drawdown together before forming any opinion.
Worst drawdown in the published test: -35.6% — at its lowest point, a follower of this test would have been down that much from the peak before any recovery.
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Attribution: strategy and published backtest results from the QuantJourney open-source library (Apache-2.0), via quants.md — published backtest results by QuantJourney, reproduced with attribution. Results are hypothetical backtest results based on historical data; they are not live trading results and do not guarantee future performance. Educational content only — not financial advice, and not a recommendation to buy, sell, or hold any security.