Strategy: The Top 4 World Country Investment Strategy

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This topic contains 31 replies, has 13 voices, and was last updated by  Mark Faust 1 year, 3 months ago.

Viewing 15 posts - 16 through 30 (of 32 total)
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  • #35632

    Vangelis
    Keymaster

    Yes there is and you could do that. The ranking cannot quantify certain factors that our algo does (cross correlations, variable lookback periods) but it is close enough. Keep in mind that low volume does not always mean there is no liquidity Here’s an example: https://am.jpmorgan.com/blob-gim/1383272223898/83456/1323416812894_Debunking-myths-about-ETF-liquidity.pdf
    Regards,
    Vangelis

    #35633

    James Vitale
    Participant

    Vangelis

    Thank you. Where would I find that list on your website? (see note directly above)

    J

    #35635

    Vangelis
    Keymaster

    Hi James,
    As a subscriber, the ranking is part of our monthly signal. You can find it under “Strategy Signals” –> “Private: The World Top 4 Strategy signs for ….”

    #35639

    Frank Wilson
    Participant

    Jimmy V,

    I find the list of one-month ETF leaders at:

    http://www.barchart.com/etf/performance/1month.php

    a handy reference, although that includes all ETFs not just country-specific.

    FW

    #37130

    Gordon Cooper
    Participant

    Disregard, posted to wrong strategy…..

    #37340

    dwedel812
    Participant

    If the purpose of this strategy is growth with diversification then why not remove the US based etfs from the model (QQQ and SPY) ..I don’t want to be adding more exposure to US markets when other models are already invested.

    Secondly the TMF allocation might be dominating the trajectory at times. For market corrections may want to add short Emerging markets (EUM), and short S&P (SH).

    Lastly, the etf selection on this model might lend better results with a shorter timeframe…shifting more weight to the 3 month performance. Case in point: RSX is not a holding at this time–is this because of mean reversion? or too long a timeframe used by the strategy?

    #37342

    dwedel812
    Participant

    Followup from my above post:

    Since the strategy now uses the BRS top holding as the hedge instead of TMF this is clearly an improvement …however it comes with an unexpected consequence -> lower diversification when combined with other strategies. For example: a portfolio consisting of:

    BRS, 10%
    World top 4, 20%
    Global sector rotation, 20%
    Max Yield, 25%
    Nasdaq 100, 25%

    This custom portfolio has a current allocation of 32% for december in JNK …this is due to the multiple strategies using BRS. This is a problem. When bonds are hot they will dominate the strategies using BRS for protection.

    I’m not certain how best to fix this but one idea is remove BRS all together from World top 4 but add short Emerging markets (EUM), and short S&P (SH) as strategy asset classes to help with corrections with a max allocation on the short etfs of say 50%.

    #37442

    reuptake
    Participant

    I’m using whole BRS instead of top BRS holding, this should mitigate this problem a bit.

    #44666

    Alexander Horn
    Keymaster

    Another idea for further diversification would be to add the hedge at the portfolio level, if you use QuantTrader. In other words, limit the hedging instruments in the individual sub-strategies, and then add either the BRS or an own hedging strategy at the meta-level. If you prefer the fixed-weight allocations from our online portfolio builder, you can now simulate this much easier with QuantTrader using the “consolidated allocation” feature introduced in version 500: https://dl.dropboxusercontent.com/u/43364046/Logical-Invest%20QuantTrader%20versions/QuantTrader500S.zip

    #51117

    reuptake
    Participant

    Anyone knows what’s going on with HEWC? Interactive Brokers and some other sites do not display current quotes (last one is from 3/23)… Volume is 0.

    #51127

    Gordon Cooper
    Participant

    Hi Reuptake-

    HEWC only trades on average 5,500 shares per day. It appears that there have simply been no trades since the 23rd, as strange as this may seem. Pull up a 1-year chart on IB and you will see this has happened several times in the past year. Yellow bars indicate days with no trades.

    #51129

    reuptake
    Participant

    Thanks! Don’t you think that using such ETF in our strategies may cause problems? Eg. QuantTrader cannot work properly since it needs quotes from last close. And what about selling it? Is there some market maker who will buy it from us?

    #51132

    Gordon Cooper
    Participant

    I agree with reuptake-

    LI strategy backtests do not account for market impact from users entering and exiting the market, and they should not as this would be impossible to model accurately. But clearly with an ETF like HEWC which is a major LI website published strategy, there are likely many subscribers invested. LI subscribers alone will certainly impact pricing in a security as thin as HEWC as we all exit at once.

    Perhaps Frank, Alex or Vangelis might want to consider a filter, dropping ETF’s from strategy universes that trade below a certain average daily volume of about 50-100,00 shares or below an average currency threshold of about $1,000,000 per day.

    #51135

    reuptake
    Participant

    Accounting for user impact is one thing, using latest price is another. Recently volatility is rather high, and I think that if QT would use data not from last close but from close 2-3 days before it could select “wrong” ETF for strategy. It’s Wednesday now, and last quote is from Friday…

    I’d rather trade non-currency-hedged version…

    #51136

    Alexander Horn
    Keymaster

    Thanks for the good discussion! HEWC volume indeed is small and has further dropped the last days. But technically speaking, QT has a close price for all days, e.g. there are no “empty” days which might create data issues, see screenshot.

    Also there are constantly bid/ask available with a 5 cent spread, so trading the ETF with a limit order (or IB Algo), so trading 1600 shares, which corresponds to a 100k investment in the WorldTop4 (100k * 0.4 HEWC / 25 per share) should not be a problem. Keep in mind this – as other index pegged ETF by rule cannot deviate substantially from their underlying index – else this would be arbitraged away inmediately – so LI investors are not “making the market” here.

    If liquidity still is a concern, there is no real alternative as a hedged MSCI Canada ETF, obviously EWC as a non-hedged ETF has much higher volume – at the cost of FX exposure.

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