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Has any thought been given to optimizing Logical Invest using Sortino ratio instead of Sharpe ratio? I think you’d get wildly good results since Sortino ratio doesn’t penalize upside volatility while Sharpe does.
I use Sortino ratio for optimizing portfolios on PortfolioVisualizer.com.
For anyone who isn’t familiar with Sortino ratio: https://en.wikipedia.org/wiki/Sortino_ratio
We did a lot of tests trying to optimize Quanttrader strategies using the Sortino ratio, however the results have been very poor! The problem is that for the Sortino Ratio strong up-moves are just positive Events, which results in more buying of an asset. Because of the mean reversion however this is normally not a good strategy. A strong up-move is equally a risk and you better keep your allocation constant or even reduce it. using the sharp ratio works much better!
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