Drawdown budgeting across correlated strategy clusters

Strategy diversification is often overstated when models share the same hidden exposure. Two independent-looking systems can both be long volatility compression, short liquidity shocks, or dependent on the same funding regime.

Drawdown budgeting starts by grouping strategies by behavior, not by codebase. We examine return correlation, shared loss windows, turnover bursts, and exposure to market stress features. The budget is then assigned to clusters before it is assigned to individual models.

This structure gives the risk layer a cleaner job. If a cluster begins consuming drawdown faster than expected, the platform can reduce related strategies together instead of waiting for each model to breach its own limit.

The goal is not to eliminate drawdown. The goal is to make drawdown intentional, bounded, and attributable.