- 03/20/2015 at 2:23 pm #18410TimothyParticipant
I’m using SPXS/TMV. How closely would this compare to SPXL/TMV?
Tim T03/21/2015 at 12:13 am #1841103/21/2015 at 8:41 am #18414Sam SokoloskyParticipant
I’m just trying to understand “very aggressive” – is it the strategy that is “very aggressive” or is it maybe (foolish) execution that would make it that?
If you have 5 LI strategies at 20% each with $100,000 ‘exposure’ in each and therefor only invest $33,333 in SPXS/TMV because it is 3x to get your $100,000 exposure (along with the rebalancing benefits of these etfs versus straight UIS) is that being “very aggressive”?
If I invested $100,000 instead of $33,333 when overall I only wanted $500,000 total exposure that would be very aggressive (aka stupid) for several reasons.
So I was thinking that the TMV/SPXL is less aggressive than the UIS SPY/TLT strategy for the same total exposure because of the rebalancing benefits (which exceed borrowing costs).03/21/2015 at 9:32 am #18419
Sam, yes this is what I meant. This strategy for my taste should only be let’s say a 5%-10% (x3 leverage = 15%/30%) of portfolio. Just my personal 2 cents..
Don’t forget that the backtest is only from Jul 2009 due to availability of ETF, not sure if I would have stuck to this strategy during 2008/09 crisis with a 3x leverage at a higher exposure. Agree that the rebalancing benefit is an argument for going short (if available at reasonable costs).03/27/2015 at 11:10 pm #18710
Alexander, The max drawdown for UIS-SPXL-TMF says -16.95%, but I assume it was probably 3x that amount? That DD looks like it is from the March 2009 date when data from the normal UIS was used. Does this then affect all the other data for UIS-SPXL-TMF – sharpe, volatility, etc.? When incorporated into a portfolio it will look like your are getting the returns of UIS-SPXL-TMF but with the risks of normal UIS at least in regards to 2008 type DD. If max DD were in the -50% range that would change things quite a bit. Am I understanding this correctly?
Thanks for all your work on this! It looks really good. I’m looking forward to the meta-strategy.03/27/2015 at 11:27 pm #18713
Thanks for the comment, actually just yesterday received a similar one, so let me expand.
Due to the late inception of the 3x leveraged ETF (TMF in April 2009), I extended the timeseries using standard UIS back to Jan 2008 to match the other strategies. We do the same for MYRS, but had properly explained, which I missed to do so far in the case of 3x UIS – now included. So the maxDD in 2008 of 16.95% is indeed from UIS, and applies also to 3x UIS due to the extension. I will extend by using synthetic TMF and SPXL data instead, this indeed is confusing.
Generally, the UIS SPXL-TMF version is interesting also from a different angle. Using the SPY-TLT signals and then executing with SPXL-TMF leads to inferior performance compared to running the signals directly for SPXL-TMF. This comes from the roll-loss of the leveraged ETF, where the daily leverage leads to tracking errors compared with the underlying ETF.
This – and the interest shown by you in the forum – led us to include the signals as a separate ‘version’, which we will make available shortly as part of the UIS subscription.
Also due to the roll-loss of the leveraged versions, I’m just exploring the best way to extend them back to at least 2002. I’m currently inclined to use a sum of squared differences approach, which you can see in the two excel files for SPXL and TMF. Happy to receive feedback on this approach.03/29/2015 at 3:01 pm #18830Jorr12Participant
Can you guys include a Max CAGR (non-levered and levered) not withstanding volatility. Then make one max cagr based on 20% and 25% volatility.
Pretty young investor, so I don’t mind the same volatility as the SP500.03/29/2015 at 3:10 pm #18831Jorr12Participant
also, is there a way to have an option to “exclude” a certain strategy. IE if I wanted to exclude MYRS for example03/29/2015 at 3:56 pm #18832
Hi Jorr, thanks for your suggestion!
A MaxCaGR would just go 100% into Max Yield, so you can use that equity curve and leverage it by your needs.
Have just included the MaxCAGR with 20% and 25% volatility constraint in the online version, seems you can stomach this – because the Drawdown is corresponding. Also, I’ve now included the UIS 3x leveraged version in the optimized solutions, we’re close to get this published. With this I also updated the ‘efficient frontier’ dots, you can nicely see the effect of including the 3x UIS.
For more advanced portfolio optimizations, please have a look at the ‘offline’ Excel version, there your can specify which strategy or market proxy to include, specify min/max weightings by strategy, put targets to minimize/maximize and put constraints in, and do a lot of other ‘magic’ with the Excel solver. This is still a first version, which runs fine on my computer, but might behave different depending on Excel and OS version, but anyhow, if you are a geek, this is what you need. Have a look at the forum thread, would be great to get your input to further develop this tool with you and other interested.03/30/2015 at 6:32 pm #18868
I have a basic question when it comes to building a portfolio of strategies. If I were to allocated 25% to 4 different strategies, then a month later say 2 were up 10% and 2 were down 10%. Would I rebalance so that I begin each month with exactly 25% of the total in each of the strategies or run them as 4 independent strategies? For example in a 100K portfolio rebalancing monthly would make each 25K in month 2 but running independently it would be 27.5K in the 2 winners and 22.5K in the 2 losing strategies. Those 2 scenarios would produce very different results by the end of a year and especially at the end of multiple years.
Which scenario does the portfolio builder assume when looking at all the statistics like MaxDD, Sharpe, CAGR of my combined portfolio of strategies?03/30/2015 at 7:45 pm #18870
Very good question, and actually not as trivial as your might think – one of the major considerations I had when launching this version based on weekly data – compared to the previously monthly.
The equity curves of the underlying strategies are based on monthly (bi-monthly for MYRS) rebalancing. When blending them together, I’m currently taking the easiest path – which is weekly rebalancing. In practical terms, the difference in results between weekly and monthly is neglectable – as the underlying strategies are rebalanced monthly and there the lower correlation between the different ETF would indeed cause larger differences (as we have seen in the MYRS recently, for example)
Using only yearly rebalancing, or even without any rebalancing would indeed lead to completely different and unrealistic results.
In future we’ll show you the ‘consolidated signals’ also at each month end – when the underlying strategies rebalance – but you will also see the daily changes in shares thereafter, in case you want to rebalance the overall portfolio more frequently, or trade later than the rebalancing date.
Hope this explains, happy to extend more.03/31/2015 at 7:47 am #18893MattParticipant
Can someone confirm that this portfolio tool is working? It seems to be broken. I cannot get it to change any numbers when I select the various strategies, or when I do a custom portfolio. I always shows the same allocation in the results. I’ve tried different browsers and also tried the google doc directly and seems to have the same problem.03/31/2015 at 8:54 am #18899
Matt, thanks for the hint, back working again. Overwrote a field in an update yesterday night.03/31/2015 at 10:13 am #18910STEPHENParticipant
Matt, I had the same issue, sent them a message.03/31/2015 at 2:17 pm #18912
Thanks Alexander, this is what I thought. I’m just trying to wrap my mind around the implications. So in essence when I run a portfolio of strategies this way the individual performance of each strategy will be different than it would have been if run independently. By taking funds from the winning strategies and adding funds to the losing strategies each month an extended time of over-performance by one strategy along with under-performance of another strategy will be more detrimental to the portfolio than if they were run independently. However if the strategies tend to mean revert at different times then the blending of strategies could produce superior results. Am I understanding this dynamic correctly? Do you have any books or articles you would recommend to further understand these concepts?
Also, if MYRS is in the portfolio it’s not practical to rebalance just that strategy in relation to the other strategies bi-monthly. Though I can’t imagine this affects the results too significantly except in periods of extreme volatility. For the portfolio tool you created do you assume MYRS only rebalances with the rest of the portfolio monthly?
Thank you for your patience in answering my questions.
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