The central insight is that capital weight and risk diverge sharply. Although equities account for 50% of capital, they contribute an estimated 86% of portfolio risk because equity volatility and intercorrelation dwarf those of the defensive sleeves.
This report sets out the opening book for the Alvermont Research paper portfolio at inception. The book is a diversified, risk-aware baseline — a multi-asset foundation against which our published single-name equity research will subsequently be measured. It is a paper account; no capital is at risk, and nothing herein is investment advice. Figures reflect the target opening allocation (account pre-deployment).
The $100,000 book is organised into four functional sleeves: a Cash sleeve (20%) held as dry powder for researched equities; a Debt base (15%) in intermediate Treasuries for ballast; a Real-Assets sleeve (15%) in gold and broad commodities for inflation and tail-risk diversification; and a Base-Equity sleeve (50%) providing core and factor beta. Positions are sized with an explicit eye to risk contribution, not headline dollar weight.
The central insight is that capital weight and risk diverge sharply. Although equities account for 50% of capital, they contribute an estimated 86% of portfolio risk because equity volatility and intercorrelation dwarf those of the defensive sleeves. The cash sleeve adds essentially no risk, and the Treasury sleeve contributes a negligible risk.
All volatility and correlation figures are computed from 752 daily return observations (21 Jun 2023 to 18 Jun 2026, source: Yahoo Finance). Estimated annualised portfolio volatility is 9.5%, with a trailing-3-year annualised return of 15.9% (Sharpe 1.26 at a 4% risk-free rate).
| Strategy | Multi-asset, long-biased opening book; long/short equity to follow |
|---|---|
| Approach | Fundamental research, sized within a quantitative risk framework |
| Base capital | $100,000 (paper) |
| Benchmark | S&P 500 total return (SPY) |
| Universe | US & developed-market ETFs; single-name equities to be layered in |
| Execution | Alpaca paper account |
| Sizing | Risk-budgeted / hierarchical risk-parity perspective |
| Data window | 752 daily obs, 21 Jun 2023 – 18 Jun 2026 |
| Inception | 18 June 2026 |
The opening book holds nine instruments across the four sleeves, listed below with asset class, sleeve, weight and dollar allocation.
| Ticker | Instrument | Sleeve | Asset class | Weight | Allocation |
|---|---|---|---|---|---|
| BIL | SPDR Bloomberg 1-3 Month T-Bill ETF | Cash | Cash equivalents | 20% | $20,000 |
| IEF | iShares 7-10 Year Treasury Bond ETF | Debt | Government bonds | 15% | $15,000 |
| GLD | SPDR Gold Shares | Real Assets | Precious metals | 10% | $10,000 |
| DBC | Invesco DB Commodity Index Tracking Fund | Real Assets | Commodities | 5% | $5,000 |
| SPY | SPDR S&P 500 ETF Trust | Base Equity | Equities – large cap | 20% | $20,000 |
| QQQ | Invesco QQQ Trust | Base Equity | Equities – large cap | 10% | $10,000 |
| IWM | iShares Russell 2000 ETF | Base Equity | Equities – small cap | 7% | $7,000 |
| XLK | Technology Select Sector SPDR Fund | Base Equity | Equities – technology | 8% | $8,000 |
| XLE | Energy Select Sector SPDR Fund | Base Equity | Equities – energy | 5% | $5,000 |
| TOTAL | 100% | $100,000 |
Holdings are grouped by sleeve. Each plays a distinct role; within equities, core beta is complemented by deliberate factor and sector tilts.
Cash sleeve in ultra-short Treasury bills; principal preservation and dry powder for researched equities.
Intermediate Treasury duration; portfolio ballast and a beneficiary of any growth scare.
Real-asset hedge against currency debasement and tail risk; low correlation to equities.
Broad commodity exposure; inflation hedge and diversifier to financial assets.
Core large-cap US equity beta and the book's performance benchmark.
Nasdaq-100 exposure; growth and innovation tilt.
Domestic small-cap beta; cyclical exposure sized to mandate.
XLK: technology sector overlay, secular growth tilt. XLE: energy sector overlay, cyclical and inflation linked.
Risk — not capital — is the unit in which this book is constructed. The chart contrasts each position's capital weight (grey) with its contribution to portfolio variance (navy), computed from the real covariance matrix. The equity positions punch far above their dollar weight; cash and Treasuries barely register.
Aggregated to the sleeve level, the asymmetry is stark: a 50/50 capital split between equity and the defensive sleeves becomes an almost entirely equity-driven risk picture.
| Estimated portfolio volatility (annual) | 9.5% |
| Trailing 3y annualised return | 15.9% |
| Sharpe ratio (rf 4%) | 1.26 |
| Equity share of risk | ~86% |
| Treasury (IEF) risk contribution | 2% |
| Largest position | BIL (20%) |
| Number of holdings | 9 across 4 sleeves |
| Net/gross exposure | 100% long / 100% gross (no shorts at inception) |
Interpretation. In risk terms, the book is not the conservative portfolio its 35% cash-and-bonds weight might imply: equity beta dominates the variance. That is intentional for an opening book built to showcase equity research — the defensive sleeves diversify and provide dry powder, not neutralise equity risk. As researched single names are funded (primarily from the cash sleeve), risk concentration will be expressed through the names we have published rather than through passive beta.
The diversification is grounded in observed correlations. The matrix below (from daily returns over the sample) shows the equity block (SPY/QQQ/IWM/XLK/XLE) moving tightly together, while gold, commodities and Treasuries are weakly correlated with equities — which is what gives the defensive sleeves their diversifying value.
Positions are sized from a hierarchical risk-parity (HRP) perspective rather than naive dollar weighting. Assets are grouped into sleeves; capital balances risk within each sleeve (inverse-variance) and then across sleeves (by inverse cluster-variance), with cash held at a fixed weight so a near-zero-volatility instrument does not distort the optimisation.
Volatilities, correlations and the covariance matrix are computed from a rolling ~3-year daily price history (752 observations, 21 Jun 2023 to 18 Jun 2026) and are recomputed as holdings change. Risk contributions use the full covariance matrix, capturing each position's true share of portfolio risk — not merely its standalone volatility.
Alvermont Research publishes independent research for educational and informational purposes only. Nothing in this document constitutes financial, investment, legal or tax advice, nor a recommendation or solicitation to buy or sell any security. The portfolio described is a paper account and does not represent real capital or actual trading. Volatility, correlation, return, risk-contribution and Sharpe figures are estimates computed from historical daily data over a finite sample and will differ from future realised values. Past performance, whether actual or hypothetical, is not indicative of future results. © 2026 Alvermont Research.