Performance is without any leverage. We calculate all performance metrics in their applicable trading timeframe.
Market Recap
Systematic trading faced challenges in July due to a rise in volatility, which was driven by geopolitical developments and persistent inflation. Large-cap stocks (SPY) ended the month flat in choppy action, gold (GLD) rose 1%, and commodities (DBC) surged 10.5% due to the high correlation with crude oil. Alternatives benefitted, with managed futures (DBMF) up 1% in July, while bitcoin (IBIT) gained 7.1%. Convexity scarcity in June and July led to higher stress in some systematic strategies, particularly in equity long-short, which was impacted by higher-than-normal volatility. However, other strategies, such as cross-section momentum and mean reversion, behaved well during this higher volatility period.
Monthly Hybrid Asset Allocation
Hybrid asset allocation gained 2% in July, and it is up 11.4% year-to-date. The Sharpe ratio since 2020 is 1.67.
Hybrid asset allocation (HAA) employs two strategies: asset cross-sectional momentum and strategic allocation. Both strategies use ETFs to generate signals. For more details, click here.
Weekly Strategy Ensemble
The weekly strategy ensemble gained 1.5% in July. Below is an excerpt from our report for next week:
The equity long-short strategy is slightly down year-to-date because hedge costs are rising in this market, but we now have three strategies that outperform the benchmark (S&P 500 index): asset- and sector-cross-sectional momentum and equity mean-reversion, with returns of 17.1%, 12.8%, and 14%, respectively.
Year-to-date, the ensemble outperforms with a 2.4 Sharpe ratio and 2.4 MAR (return/drawdown) versus a 1.2 Sharpe ratio and 1.2 MAR for the benchmark (the S&P 500 index). Equity volatility is at 6% and remains below the target of 8%.
Year-to-date, the strategy ensemble is up 8.9%. Note that the objective of the ensemble is to realize high risk-adjusted returns at a volatility less than 8%, not to outperform the benchmark. For more information, click here.
Transparency Statement and Disclaimer
Our weekly and monthly signals are transparent about signals and positions, and there is no ambiguity. We report all entries and exits in advance for the opening of the following day, week, or month.
The signals are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness of the signals for any particular purpose. Under no circumstances should the strategies be treated as financial advice.
Strategy Package
The purpose of the package is to provide informational content that aids in the development of trading strategies towards becoming a professional trader or even establishing a hedge fund. The package provides the rules for a total of 16 trading strategies plus the PSI5 algorithm.
Charting and backtesting program: Amibroker. Data provider: Norgate Data