A Calendar Spread is a portfolio consisting of long position in one futures contracts and a short position in another futures contract of the same underlying asset and different expiration date. A profitable mean reversion strategy is formed based on the roll returns for back / front VIX futures (VX futures).
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Investment Performance
Investment Return (?):
17.5%
Volatility (?):
10.8%
Sharpe Ratio:
1.6
Maximum Drawdown:
-12%
Investment’s Fundamental Concept:
A Calendar Spread is a portfolio consisting of long position in one futures contracts and a short position in another futures contract of the same underlying asset and different expiration date. The calendar spread trading signal depends on the roll return only and not the spot price. A profitable mean reversion strategy is formed based on the roll returns of futures.
Investment’s Logic:
A Calendar Spread is a portfolio consisting of long position in one futures contracts and a short position in another futures contract of the same underlying asset and different expiration date.
The spread is defined as the differences of log prices of the 2 legs to generate trading siganls assuming the market value of the 2 legs is the same every period. Only the roll returns are considered not the total return of the future.
ADF test is run for 12-month log calendar spread of back / front VIX Future VL and stationary is confirmed with 99% probability and half-life of 36 days.
A linear mean reversion profitable strategy is formed based on the roll returns for back / front VIX futures (VX futures).
Other Investment Strategy Characteristics:
Investment Type:
Statistical Arbitrage
Investment Risk:
1/5 Very Low
Backtest Range:
30-40 years
Rebalancing period:
Daily
Investment Strategy Markets:
VIX Futures
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