Universal Investment Strategy

Investment Summary
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:1.33Maximum 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.

Universal Investment Strategy

Other Investment Strategy Characteristics:
Investment Type:Momentum StrategyInvestment Risk:2/5 LowBacktest Range:30-40 yearsRebalancing period:Daily
Investment Strategy Markets:
  • Dow Jones Stoxx 50 index futures (FSTX)
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