I.e., for any profitable strategy, odds are that it will show higher
returns during periods of high volatility, so I'd be more interested in something like a Sharpe Ratio per trade when comparing subsets of trades.
WASHINGTON (Reuters)- Liquidity in the ultra-deep U.S. Treasury market
suffered during the period of high volatility between May and early July, after the U.S. Federal Reserve began talking about scaling back asset purchases, according to a Fed poll released on Thursday.
This modification could help reduce
drawdowns during periods of high volatility and / or negative market conditions (see 2008 - 2009), but it could also reduce total returns by allocating to cash in lieu of an asset class.
If a market has an average daily range of 17 points,
during a period of high volatility its range may expand to 25 to 30 points or more.
During periods of high volatility, the Portfolio Manager will write (or sell) a call option against some of its positions in order to hedge downside risk, while generating an income stream from the sale of options.
During periods of high volatility, small cap value managers have produced alpha of 1.4 versus periods of low volatility when they have produced alpha of -0.71.
During these periods of high volatility it is important to remind oneself that financial markets are social structures.