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As in a previous post, I assume there are two stocks. The first stock is taken as the numeraire so that its price is constant. The second stock is quoted in terms of the first one, and its relative price is \(p\). Alternatively, one can see this as a universe with cash (paying zero interest rate) and a risky asset with price \(p\). In all cases, the return of the first asset is always zero. I assume the price is initialized at \(1\).   I consider two policies. The first one continuously rebalances so that the weight of the portfolio on the risky asset is \(50\%\). \(50\%\) at all times.  The second one starts with a weight of \(50\%\) on the risky asset but never rebalances. Both strategies are funded with one dollar at inception. I then look at the relative pay-off \(R\) of the two strategies, i.e. long the rebalanced portfolio, short the buy-and-hold portfolio. # Intuitions