A note from Bridgewater Associates, an investment firm that oversees US$150 billion in client assets, vividly described how its founder, Ray Dalio, “laid the foundation” of risk parity while developing the All Weather investment strategy. The idea for All Weather is simple: Different economic scenarios pose risks to different asset classes throughout the business cycle. Dalio and his team identified four major risk scenarios and made sure that at least a part of the portfolio could weather each risk. So this is where the All Weather is similar to risk parity: Instead of targeting optimal risk and return in the traditional portfolio optimization setting, both strategies strive to achieve balanced risk contributions from all asset classes.

Source: Risk Parity Made Easy: Cliff’s Notes