|
PureBytes Links
Trading Reference Links
|
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@xxxxxxxxxxx: 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@xxx> 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@xxx>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
>
------------------------------------
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/equismetastock/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/equismetastock/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:equismetastock-digest@xxxxxxxxxxxxxxx
mailto:equismetastock-fullfeatured@xxxxxxxxxxxxxxx
<*> To unsubscribe from this group, send an email to:
equismetastock-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|