Drawdown reduction

[nikneural]

Hi, I wanted to know what is the best metric to use to reduce drawdown. If I count the portfolio for some period, they give a small drawdown, then the next month they give x3 drawdown, if there is a way, how to avoid this?

[dcajasn]

Hi @nikneural,

It depends on what do you want, each drawdown risk measure has advantages and disadvantages based on their definitions, but to reduce drawdowns you have several options:

• Removing high volatility assets from your asset universe.
• Adding constraints on max weights to reduce concentration.
• Adding constraints on other risk measures.
• etc.

Best,
Dany