Barbell sleeves with lower shared risk

A barbell mix of steadier sleeves and a higher-octane breakout sleeve that shows how low shared correlation can improve the total stack.

Portfolio return

10.8%

Portfolio volatility

7.9%

Portfolio Sharpe

1.37

Diversification ratio

1.72

Median terminal

2.09x

Median max drawdown

10%

Why this scenario matters

This scenario helps explain why a volatile sleeve is not automatically bad if it brings different risk to the portfolio and is sized appropriately.

A higher-vol sleeve can help if it is weakly correlated with the rest of the stack.
Portfolio quality depends on interaction terms, not only standalone returns.
Sizing and correlation together determine whether the barbell works.

Sleeves in this stack

Stat arb

35% weight · 9% return · 7% vol · corr A/B 0.10

Carry

35% weight · 8% return · 11% vol · corr B/C -0.20

Vol breakout

30% weight · 16% return · 24% vol · corr A/C -0.05