How do I short the weakest tickers in a list?

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  • #79308
    David S
    Participant

    I have constructed a list of tickers in QT following the instructions in https://logical-invest.com/quanttrader-application/backtesting-software-tutorial/

    Selecting the top N highest ranked tickers works as expected and desribed in the tutorial. As a further step, how can I set up a short portfolio though? I’d like to short the M weakest tickers in a list.

    I can select “short” but it appears to be shorting the strongest tickers which is a bit counter-intuitive.

    #79314

    You can use the parameters “Mean reversion weight” and “Mean reversion period %” to invert the performance of the stocks. Set “Mean reversion period %” to 100% so that it uses the full lookback period and now you put the “Mean reversion weight” to -200% which means that it substracts 2x the performance from the performance.
    This way +2% will be +2% – 4% = -2% and -2% + 4% = +2%. This way the worst stock will be on top and you can do a normal ranking and buy or short these bad stocks. I am not sure however that it works well as these stocks could do big upward jumps because of mean reversion.

    Regards Frank

    #79330
    David S
    Participant

    Thank you, Frank, that works as you described.

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