Hello dear traders and analysts!
What do you think about trading of portfolio ratios? Is there any sense in comparison to spread trading or long/short portfolios. Each time I make an order a capital parity is preserved automatically.
Example - DJI-"top" stocks vice DJI index: [HD+UNH+...]/DJI. It is not obvious how to make optimization of such "cross rate", however I suppose that only closely correlated portfolios fit for such trading model. I have made a candlestick chart of such ratio in one portfolio platform. Looks good since 2011. Comparison with DJI is not bad although correlation more than 20%.
What do you think about trading of portfolio ratios? Is there any sense in comparison to spread trading or long/short portfolios. Each time I make an order a capital parity is preserved automatically.
Example - DJI-"top" stocks vice DJI index: [HD+UNH+...]/DJI. It is not obvious how to make optimization of such "cross rate", however I suppose that only closely correlated portfolios fit for such trading model. I have made a candlestick chart of such ratio in one portfolio platform. Looks good since 2011. Comparison with DJI is not bad although correlation more than 20%.