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Thanks, and sorry for the delay in responding. My brother-in-law was
in town with his family and then I went to New York for the Market
Technician Association annual symposium. It was by far their best
symposium I have been to. Some real heavy weight speakers.
I will do some more research on short bias strategies and also read
the paper you recommended.
What I've started doing recently is looking at the impact of
increasing shorts, what impact other asset classes would have, and
also remove as much beta as possible by adding double short index
ETFs.
So, no longer beating the bench is important, but I am looking for
more beta neutral, low correlation to the bench and higher Sharpe
ratio. Each is equally important. I am also adding a lot of pair
trades to reduce volatility and added a third overlay to this strategy
-- macro calls. The switch between these strategies as you recommended
is based on an oscillator.
Regarding macro calls and pair trades, I am also guaging the impact of
adding long or short Treasuries. And buying country specific ETFs that
have stronger technicals and sell those that have weaker trends.
Regarding doing technical analysis on bonds, it's nearly impossible as
getting hold of good data is difficult if not impossible.
On Fri, May 8, 2009 at 9:29 AM, dasein_10 <daniele_delmonte@xxxxxxxxxxx> wrote:
>
>
>
> For the specific problem of strategy inverse correlated with Vix, peraphs
> you can search in the area short bias strategy/contrarian strategy (not
> trend following).
> I agree with you that is really difficult in general find such reliable
> strategy.
> Also you can use a switching model: use two core group of strategies: trend
> foll. and contrarian (or value)(also if they doesn't work so efficiently)
> then use an indicator (ad ex an oscillator of performance of the 2 group) to
> switch from 1 group to the other.
> In practice when a goup is perfoming too much or too little you change
> strategies weights.I don't know if works but...
>
> For the multi asset class system: Also I'm starting to study this subject,
> here I think you have to select 2 way.
> the first using trend following str. with the important step of good money
> management.
> In practice you want to replicate a classic CTA, but with ETF.
> Or create a GTAA, mixing value e trend foll. strategies, with more long
> trades.
>
> I manage the Pharus Market Neutral Fund, you can also find me on bloomberg
> Daniele Del Monte (Pharus Asset Manag)
>
> PS: if you work on bond why you don't prove to backtest some strategies on
> bond?
> If you can create a good database (the big problem with bond) you can use
> metastock explorer to create backtest.
> I have not time to try nowbut I hope to make it in the future.
> The idea is: write an exploration that give you the parameters you need and
> one that give you the perfomance, then run it with old date (for exemple
> every two monts)(with the correct day difference for perfomance) .
> then save all the matrix in a excel file: every date / matrix) on one sheet,
> then with a simple filter you can see the average perfomance of the first X
> bond.
> collect all the two months perfomance for some years then you have an equity
> line of the simulated fund.
> Also when you have tha data in excel you can add some bloomberg link (BDP )
> and add in the selection rules fundamental data
>
> --- In equismetastock@xxxxxxxxxxxxxxx, "dasein_10" <daniele_delmonte@xxx>
> wrote:
>>
>> All the momentum/relative strengh startegies tend to be correlated (less
>> or more) ((based upon my work, but isn't short term strategy, so i speak
>> only for position trader point of view))
>>
>>
>> If you mix uncorrelated -high beta/momentum- strategies you are not
>> solving the problem: you can bring down volatility, but you have still the
>> correlation with the MOTHER momentum strategies.
>> You NEED inverse correlation: for exemple contrarian or value startegies,
>> take a look on this really interesting paper:
>> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1363476
>>
>> I don't know the strategies you are using, but can be possible that are
>> all based upon the same phenomenon: momentum (maybe they take different
>> aspects but are similar in the foundation).
>>
>> So the first solution to lose the beta (and be market-neutral) is FUTURES
>> hedging (also dinamic hedging)
>> It's possible also an option strategy, if you want to have an asymmetrical
>> payoff for the hedge.
>>
>> I have found a personal solution for the long-short equity fund I manage.
>> I have studied the statistical property of my momentum strategies, and
>> based on a particulare oscillator that tend to predict strategy returns, I
>> exit momentum strategies and entry, for example, a value strategies, becouse
>> this two are inverse correlated.
>> The hedging is with futures now, but I'm studing a dynamic futures-option
>> strategy.
>>
>>
>> Just one question: your sharpe data, on how many time is calculated?
>> And what is your database (number of stock and country-start data)
>>
>> You you want to speak more send me an email to daniele_delmonte@xxx: this
>> topic It's taking a lot of space and I don't know if can be useful for
>> everybody ;)
>>
>>
>>
>>
>>
>>
>>
>> --- In equismetastock@xxxxxxxxxxxxxxx, Rajiv Vyas <rajiv1@> wrote:
>> >
>> > Yes, I am picking high beta names and hence one of the key component of
>> > my
>> > strategy is a strong stop loss descipline.
>> > I am studying market neutral strategy but what I am trying to do is
>> > instead
>> > of futures, I want to see if by combining a few non correlated
>> > strategies, I
>> > can more or less eliminate long periods of underperformance and also
>> > some
>> > whipsaws.
>> >
>> > The goal is to have more or less a pure alpha strategy or a strategy
>> > that
>> > generates 5% annual excess return with about 1.5 Sharpe ratio.
>> > Currently,
>> > the combination of my strategies is generating about 3% excess return a
>> > month with a Sharpe ratio of close to 2.00.
>> >
>> > I think one of the main reasons why methodical investing hasn't gained
>> > traction in the asset management business is because fund managers have
>> > to
>> > produce alpha every quarter and with methodical investing, you could
>> > have
>> > months if not years of underperformance.
>> >
>> > The problem with my current combination is that they are all strongly
>> > correlated. They pick high beta, relative strength and momentum names.
>> > Recently, I added one non correlated strategy and have increased my
>> > shorts
>> > in other two. That has brought down the volatility. I am wondering if
>> > anyone
>> > has come across other approaches?
>> >
>> > Thanks again,
>> >
>> > Rajiv
>> >
>> >
>> >
>> > On Thu, Apr 30, 2009 at 9:35 AM, dasein_10 <daniele_delmonte@>wrote:
>> >
>> > >
>> > >
>> > > Just an idea:
>> > > If your strategy is inversely correlated with VIX, probably It means
>> > > that
>> > > you are picking just high beta stock.
>> > > In fact, VIX and SP500 are highly inversely correlated (from 1998 is
>> > > -0.75)
>> > > so your strategy probably are also veri inv. correlated with market,
>> > > so your
>> > > stocks/strategy must have high beta.
>> > >
>> > > You are studing market neutral strategy?with futures hedging perhaps?
>> > >
>> > > Analyse the beta of your strategy can help you: to isolate the alpha
>> > > and to
>> > > understand if and how you can produce alpha
>> > > Maybe you can try to immune your portfolio with "beta"-hedging to
>> > > isolate
>> > > alpha.
>> > >
>> > > I want to add just one thing: the big increase of volatility happen
>> > > often
>> > > at the start of a bear market, just he moment that the trend follower
>> > > /
>> > > Momentum strategy underperform, so I can think in general that
>> > > momentum
>> > > strategy are affected by the volatility jump.
>> > >
>> > > --- In equismetastock@xxxxxxxxxxxxxxx
>> > > <equismetastock%40yahoogroups.com>,
>> > > Rajiv Vyas <rajiv1@> wrote:
>> > > >
>> > > > Most of the systems that I use currently are inversely correlated
>> > > > with
>> > > VIX
>> > > > -- if vix goes down, my systems do much better then the benchmark on
>> > > > that
>> > > > day -- sometimes a combination of 10 systems give an excess return
>> > > > of
>> > > more
>> > > > than 1%. When the VIX goes up, the systems in aggregate
>> > > > underperform.
>> > > > My experience tells me that most systems (at least those in the
>> > > > public
>> > > > domain) and TA in general, are inversely correlated to volatility
>> > > > i.e.
>> > > they
>> > > > outperform the bench when volatility goes down.
>> > > >
>> > > > So, my question is: Has anyone come across a broader philosophy, or
>> > > > a
>> > > > strategy or systems that outperforms when the VIX is increasing.
>> > > >
>> > > > Thanks,
>> > > >
>> > > > --
>> > > > Rajiv
>> > > >
>> > >
>> > >
>> > >
>> >
>> >
>> >
>> > --
>> > Rajiv
>> >
>>
>
>
--
Rajiv
Sent from Baltimore, Maryland, United States
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