Carry strategies systematically harvest the return earned by holding a higher-yielding asset versus a lower-yielding one, exploiting the premium paid to insurance sellers across currencies, fixed income, and commodities.
Carry and trend are commonly presented as uncorrelated risk premia that improve portfolio Sharpe when blended. They are uncorrelated in calm markets. In crisis regimes, they converge dramatically — carry unwinds violently while trend is building short positions, creating a window where both are moving in the same direction. Blending 50% carry into a trend program removes half the crisis alpha of the trend program at exactly the time it matters most.
Commodity roll yield (backwardation = positive carry) is driven by physical inventory conditions, not by financial risk premia. When crude oil is in backwardation, physical storage is tight and spot users will pay a premium. This makes commodity carry a leading indicator of fundamental supply stress — it predicts physical market conditions, not investor sentiment. Treating all commodity sectors' carry as interchangeable ignores sector-specific physical cycles.
A well-diversified multi-asset carry portfolio wins on roughly half of trading days. This is not a sign that the strategy is broken — it is the structural feature of a risk premium that is earned slowly with occasional sharp reversals. Most traders and allocators cannot tolerate a strategy that "feels like a coin flip" for months at a time, which is exactly why the premium persists. The behavioral capacity to hold carry through these periods is as important as constructing the carry correctly.