Canterbury Portfolio Thermostat

Canterbury Portfolio Thermostat

Our studies show that changes in market volatility can act as a leading indicator of future market direction. Low or decreasing volatility is associated with Bull markets. High or increasing volatility is typical of Bear markets or bubbles.

The key to successful investing is risk management. An effective portfolio management process should be based on scientific principals, dynamic and testable. The investment process should manage risk by responding to changing market environments quickly and without emotion.

The Portfolio Thermostat Matrix identifies 12 different Market States (environments). There are 5 Bullish (rational-low volatility) Market States; 4 Bearish (volatile and/or increasing volatility) Market States; 3 Transitional Market States (including caution).

Market States are determined by three primary inputs

  1. Our indicators identifing the "long term" trend of the market or security.
  2. Our proprietary Canterbury Volatility Index (CVI) and related volatility indicators are designed to identify the current market environment.
  3. Our short term supply and demand indicators determine which and when portfolio adjustments are made.