Fully automated futures trading

Hi GAT,
Why does Fundseeder use the Sortino ratio /sqrt(2) ? I understand the Sortino ratio, but I don’t understand why the multiply it by 1/sqrt(2). I also don’t see this documented that way anywhere else...
I am guessing you have an idea why given your extensive knowledge and experience
 
Hi GAT,

you mentioned before that you outperformed AHL previously because of an overweight in carry. Is this the result of your optimisation process or did you hand craft the weighting or is it due to the fact that carry is deterministic vs trend which is more random.

Is there a reason for using the forecast strength being proportional to diff of EMA ?
 
traider said:
Hi GAT,

you mentioned before that you outperformed AHL previously because of an overweight in carry. Is this the result of your optimisation process or did you hand craft the weighting or is it due to the fact that carry is deterministic vs trend which is more random.
More...

Carry and momentum are diversifying, so barring any information about performance (and there isn't any statistically significant difference between them) you'd want to split your portfolio 50:50 (assuming you have the same number of trading rule variations in each camp) for optimal expected performance. An institutional fund like AHL's flagship fund has to allocate more than 50% to momentum, so has a suboptimal portfolio.

traider said:
Is there a reason for using the forecast strength being proportional to diff of EMA ?
More...

Forecasts are proportional to sharpe ratio (mean / vol), a diff of EMA is a return in delta(price) space, so the correct forecast is proportional to diff of EAM/ vol (delta(price))

GAT
 
Sorry to butt in but, to be clear, GAT, are you saying there are multiple flavours of carry in your system (perhaps different smooths?) or do you simply downweight carry due to the lower number of carry variations?
 
Elder said:
Sorry to butt in but, to be clear, GAT, are you saying there are multiple flavours of carry in your system (perhaps different smooths?) or do you simply downweight carry due to the lower number of carry variations?
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Both - I have multiple variations of carry, with different smooths; and carry gets a lower weight than it would otherwise because I have only two carry trading rules (both with ~10 variations) and about 30 odd variations of different kinds of momentum.

GAT
 
globalarbtrader said:
An institutional fund like AHL's flagship fund has to allocate more than 50% to momentum, so has a suboptimal portfolio
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Of course, it doesn't matter that AHL's portfolio is "suboptimal" as a stand-alone. Institutional investors can easily access carry βs (as they can equity βs, et al), and generally look to their trendies for clean trend exposure.
 
truetype said:
Of course, it doesn't matter that AHL's portfolio is "suboptimal" as a stand-alone. Institutional investors can easily access carry βs (as they can equity βs, et al), and generally look to their trendies for clean trend exposure.
More...

Of course. A cleaner measure of performance might be something like my entire portfolio vs AHL risk parity + X% momentum.

GAT
 
globalarbtrader said:
Both - I have multiple variations of carry, with different smooths; and carry gets a lower weight than it would otherwise because I have only two carry trading rules (both with ~10 variations) and about 30 odd variations of different kinds of momentum.

GAT
More...
Hi GAT,
In your chapter 15 portfolio from your first book, you have multiple versions of EMAC rules and only one Carry rule, yet you still weight the Carry forecast at 50%. This seems different from how you are weighting trading rules in your own portfolio. Why is this? Thanks.
 
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