The phrase “risk on/risk off” may now be ingrained in the vernacular of global investors. Lee attempts to crystallize what risk on/risk off really means by analyzing an extreme state of the market when the correlation of all assets is perfect. He derives a set of normative results of how assets should behave in relation to the investment opportunity set. Although his results do not provide guidance on the interpolation between a given state and the extreme state of perfect correlation, Lee believes that his analysis can serve as a compass for the investment decision-making process in the event that investors believe the market is moving toward or away from a risk-on/ risk-off environment. Lee discusses the investment implications in relation to the risk parity portfolio, global asset allocation, and active portfolio management.