Diversification during equity stress
These views describe historical behaviour, rather than estimated future protection.
Observations and returns
Nifty 500 uses the existing repaired total-return series. Bonds use native NSE 5-year benchmark G-sec total-return observations. Gold uses the existing native INR domestic price series, including the documented pre-2005 currency-linked splice. It is a price asset with no dividend reinvestment. All are gross of fund fees, transaction costs and taxes.
Take the last actual observation in each completed calendar month, provided it is within seven calendar days of month end. Do not fill missing closes. Reindex to a complete monthly calendar: returns require this month’s and the preceding month’s closes. The panel begins when all three assets first have usable monthly observations; each pair subsequently uses its own valid adjacent returns. Dates and counts are published for each pair.
Correlations and conditional returns
Chart Pearson correlations require 36 consecutive paired monthly returns. A missing return breaks that window. All-history correlation requires 36 valid paired returns. Bad equity months are fixed at Nifty 500 returns of −5% or less. Conditional correlation and mean diversifier return use those same paired months and are withheld below twelve observations. Thresholds are descriptive and were not optimised against subsequent returns. Small samples, restricted return ranges and overlapping episodes make conditional correlations uncertain. No predictive significance claim is made.
Co-drawdowns
Drawdowns are percentage falls from trailing 36-month maximum monthly closes, requiring 36 consecutive prices. They are not all-time or daily-peak drawdowns. Equity stress is fixed at −10% or worse. The co-drawdown share is the fraction of those paired equity-stress months in which the other asset is strictly below its own trailing high. Both drawdowns must be valid; the share needs twelve stress observations. Even tiny negative readings count as below peak.
Limits
Monthly sampling omits intra-month falls. Indices are not investable products. Repaired and currency-linked history retains the existing source limitations. A trailing peak can fall when an old high exits its window. Future protection, strategy returns, crisis event studies, inflation conditioning and alternative horizons remain separate research work.