The Universal Investment Strategy rebalance every month on some multiple of 5% between SPY and TLT that previously maximized the following quantity (returns/vol^2.5 on a 72-day window).
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Investment Performance
Investment Return (?):
13.17%
Volatility (?):
9.90%
Sharpe Ratio:
1.33
Maximum Drawdown:
-16.80%
Investment’s Fundamental Concept:
The concept on which the strategy is based uses a walk-forward methodology of maximizing a modified Sharpe ratio, biased heavily in favor of the volatility rather than the returns. That is, it uses a 72-day moving window to maximize total returns between different weighting configurations of a SPY-TLT mix over the standard deviation raised to the power of 5/2. To put it into perspective, at a power of 1, this is the basic Sharpe ratio, and at a power of 0, just a momentum maximization algorithm.
Investment’s Logic:
The process for this strategy is the following: rebalance every month on some multiple of 5% between SPY and TLT that previously maximized the following quantity (returns/vol^2.5 on a 72-day window).
The concept on which the strategy is based uses a walk-forward methodology of maximizing a modified Sharpe ratio, biased heavily in favor of the volatility rather than the returns. That is, it uses a 72-day moving window to maximize total returns between different weighting configurations of a SPY-TLT mix over the standard deviation raised to the power of 5/2. To put it into perspective, at a power of 1, this is the basic Sharpe ratio, and at a power of 0, just a momentum maximization algorithm.
Other Investment Strategy Characteristics:
Investment Type:
Momentum Strategy
Investment Risk:
2/5 Low
Backtest Range:
30-40 years
Rebalancing period:
Daily
Investment Strategy Markets:
Dow Jones Stoxx 50 index futures (FSTX)
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