Axioma Risk Monitor
Equity edition

US risk at year-to-date low
The Japanese yen loses ground
Chile’s market and currency risks skyrocket



US risk at year-to-date low


US short-horizon risk dipped to a year-to-date low last week, as US stocks climbed to fresh records. Risk declined for most major markets in 2019, but the US saw among the largest drops. Axioma’s short-horizon fundamental US model reported a decline in its risk forecast of over 9 percentage points for the Russell 1000 year to date. The Russell 1000’s risk of 11.4% as of last Thursday was well below the 37-year long-term median of 14%. However, the current level of US risk is still more than double that of the historical low of 5.25% reached in November 2017. For a comparison of the determinants of the current lows and those recorded in 2017, please see our blog post Beware what lurks beneath the surface of low volatility.

See graph from the US Equity Risk Monitor as of 14 November 2019:


The Japanese yen loses ground


With investors taking on more risk and drifting away from safe-haven assets, the Japanese yen depreciated against the US dollar. Only a month ago, the yen was the best performing developed market currency, posting the highest six-month return against the greenback. Last week, the Japanese currency was positioned near the low-end of its return range against the US dollar, and its six-month return against the US currency turned negative. The Canadian dollar and Singapore dollar became the frontrunners, posting the largest positive returns for the same period. In terms of risk, the yen was still among the least risky developed-market currencies, its volatility slightly exceeding 5%. Only the euro, the Canadian dollar and the Singapore dollar showed lower volatilities.

See graph from the Equity Risk Monitors as of 14 November 2019:



Chile’s market and currency risks skyrocket


After weeks of political unrest, Chile is now the riskiest emerging country, surpassing even Greece and Turkey, which have topped the list for quite a while. Chile’s volatility of 21% was about 2 percentage points higher than that of Turkey—the next riskiest emerging country—as measured by Axioma’s Worldwide short-horizon fundamental model. Chile’s volatility almost doubled from mid-October, when protests were triggered by an increase in the subway fare. As protests intensified and more grievances aired, Chilean stocks dropped, posting on Thursday a six-month loss of 15% (denominated in US dollars).

The Chilean peso also took a big hit, weakening last week to an all-time low against the US dollar. While positioned at the high end of its volatility range against the US dollar, the peso is still less risky than the Turkish lira, lagging about 3 percentage points behind it.

See graphs from the Emerging Market Equity Risk Monitor as of 14 November 2019:



Stay Connected


Webinar Recording | Axioma Insight™ Q3 2019 Risk Review

In this webinar, the Applied Research team broke down the drivers of volatility, style factor returns and their portfolio implications, and other topics that will help investors better understand the risk environment that drove their portfolio returns.

Watch the recording here.

Qontigo Investment Intelligence Summit: New York 2019

Date: November 20, 2019

Join us this Wednesday in New York for a full day of expert presenters, illuminating presentations and thought-provoking discussion.

Register here.

Webinar | Qontigo Insight™ Quarterly Multi-Asset Risk Review

Date: November 26
Time: 11:00 ET | 4:00 PM GMT

Join Christoph V. Schon, Qontigo's Executive Director of Applied Research, in this webinar to hear how the ensuing “flight-to-quality” flows and low exchange-rate correlations affected portfolio risk and diversification.

Register here.

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A New Data-Driven Fixed-Income Risk Framework

Modeling potential losses of a credit-risky bond portfolio based on granular, issuer-level return data is notoriously difficult. A myriad of data-quality concerns arise, driven by a vast, frequently illiquid market for which evaluated pricing is often stale, inconsistent or simply missing.

Shortchanged by the No-Short Constraint — and Other Observations on 2019 Factor Performance

Many quant managers are having a tough go of it this year. While one might blame factors in general, their returns do not tell the whole story. We think one of the major culprits in the US is that a number of factors worked better on the short side and among small-cap names.

On the Blog

Beware what lurks beneath the surface of low volatility

On Friday November 8, the VIX closed at 12.07, a level not seen since Q4 of 2017. The US economy and stock markets have once again outperformed those of every other developed country this year. 

Curiouser and Curiouser: Reflections on 2019 Factor Performance or “Shortchanged by the No-Short Constraint”

Many quant managers are having a tough year. While one might blame factors in general, their returns do not tell the whole story (or even the bulk of the story).


In the News

CNBC | Trade war the most dominant geopolitical risk over market sentiment, strategist says

Christoph Schon, executive director of applied research at Qontigo, discusses optimism toward a “phase one” trade deal between China and the United States.

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Qontigo has announced the appointment of Stephan Flägel as Global Head of Indices & Benchmarks, effective as of December 2, 2019.

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