Low Volatility Stocks Strategy: Beta, Performance, and Returns Assessment
Low volatility stock strategy involves investing in stocks with lower volatility or price fluctuation than the overall market. These stocks may provide more consistent returns and less risk, and in they have also proven to offer a better return than high volatility returns (in the long run). In the short run, however, they might be better which is why they may not appeal to day traders and swing traders.
Let’s first look at the volatility of low and high volatility stocks. We use rolling returns of two ETFs: SPLV as a proxy for low volatility stocks and SPHB for gh-volatility stocks. Both ETFs started trading in 2011 (Shown in the image below).
Clearly, the pink line, which shows the rolling returns for high volatility stocks (SPHB), has a much higher volatility than the blue line (SPLV).
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/low-volatility-stocks-strategy/