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> Great post, Mark. I agree with your and Bob's comments:
> basic portfolio theory says the Sharpe ratio will increase as
> the square root of the number of market/systems being traded.
But what is the optimal "mix" ?
Example: 9 "scenarios" to consider.....
1) 9 systems trading one symbol/instrument
2) 1 system trading 9 symbols/instruments
3) 3 systems each trading 3 symbols/instruments, each one different
I think the correlations between the symbols and then the systems
will have a great effect on the risk reduction profile of the portfolio
"mix".
For instance, 3 systems, one is trend-following, the other mean-reverting,
and say the
final one is a break-out system. Certainly the profile using these 3
systems each trading 3 Nasdaq stocks
Would be different than one system trading 3 currencies, one system trading
3 commodities, and the final one trading 3 NYSE stocks.
Likewise with each system trading 1 currency, 1 commodity, and 1 stock.
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