Shuli Ren, Columnist

Ray Dalio's Risk Parity Trade Is Alive and Well in China

Stocks and bonds are moving in opposite directions again. This relationship has more room to run on the mainland.

July 15, 2020 at 11:49 PM UTC

Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.

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Risk parity trades, made popular by Bridgewater Associates LP founder Ray Dalio, have made a nice comeback since the global selloff in March. In its simplest form, this strategy assumes that government bonds rally when stocks fall — a dynamic Covid-19 turned on its head when everything was crashing at once.

Now both asset classes are behaving again, and the S&P Risk Parity Index that targets 15% market volatility has returned over 45%. But for the next leg up, hedge funds should consider paying a visit to China.