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Strategies

All strategies table 1

Above is the performance comparison of systematic trading algorithm / strategy which is described in detail below. The algorithmic model is based on different criterias giving weekly buy or sell orders. The comparison is for last 15 years, from 1999 until 2014. Companies invested have minimum market cap of USD 700 million and OTCs, ADRs, foreign / non US stocks and less liquid companies are ignored / excluded. Returns are net of commission (0.1% for every trade) and slippage (0.3% for every trade).

 

Strategy: Multiple Factors

Description: This systematic trading algorithm is based on multiple factors such as various valuation metrics, growth in comparison to valuation, momentum, asset light, high return on asset, high return on debt and other variables. The algorithmic model rebalances itself weekly and ranks stocks based on specified criteria’s. After ranking it gives buy, sell or hold orders once a week. 

Criteria for selection: The trading algorithm has been thoroughly tested on various universes. Only prominent universes are displayed above:  i) companies invested with a minimum market cap of at least USD 100 million   ii) companies invested with a minimum market cap of at least USD 700 million (mid and large cap)  and   iii) companies only in S&P 1500 index. The portfolio maintains 10 stocks at any given point. The model ignores / excludes OTCs, ADRs, any foreign / non US stocks and less liquid companies.

Buy and sell: If ranks of existing stocks in the portfolio fall below the specified threshold, the model gives sell order and buys stocks which are currently ranked higher. Once signals are generated, the stocks are bought and sold at next day’s opening price.

Hold: If an existing stock in the portfolio maintains its rank above the specified threshold the model holds the stock.

Commission and slippage: Model includes 0.1% commission and 0.3% slippage for each trade.

Performance: In last 15 years (from 1999-2014) the algorithmic trading model has significantly outperformed S&P, generating an exceptionally high return of approximately 40%+ cagr (net of commissions and slippage), as compared to 3.3% for S&P during that period while consistently beating the market every year. Average holding period of a position is approximately 25 to 45 days. Below are performance and other details:

MF 100+ unhedged

Chart MF unhedged

Annual Performance MF 100+ unhedgedDiff Yrs Performance MF 100+ unhedgedStats MF 100+ unhedged

 

MF 700+ unhedgedChart MF 700+ unhedged

Annual Performance MF 700+ unhedged

Diff Yrs Performance MF 700+ unhedgedStats MF 700+ unhedged



MF S&P1500 unhedgedChart MF S&P1500 unhedgedAnnual Performance MF S&P1500 unhedgedDiff Yrs Performance MF S&P1500 unhedgedStats MF S&P1500 unhedged

 

Hedge: The above algorithmic model is tested completely unhedged and with a hedge. In case with a hedge, when specific hedge rules are met, a hedge is entered with 50% of the portfolio allocated to shorting S&P ETF (ProShares Ultra S&P500 – SSO). The hedge is entered if the current year consensus EPS estimates are trending down or using VIX as a gauge to determine if an aggressive or patient moving average crossover should be used.

MF 100+ unhedged

Chart MF 100+ hedgedAnnual Performance MF 100+ hedgedDiff Yrs Performance MF 100+ hedgedStats MF 100+ hedged



MF 700+ hedged

Chart MF 700+ hedgedAnnual Performance MF 700+ hedgedDiff Yrs Performance MF 700+ hedgedStats MF 700+ hedged

 

MF S&P1500 hedged

Chart MF S&P1500 hedgedAnnual Performance MF S&P1500 hedged

Diff Yrs Performance MF S&P1500 hedged

Stats MF S&P1500 hedged

 

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