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Hi, I am looking to make improvements on my Minimum Variance Portfolio strategy. The current strategy generates ~12% CAGR with 11% max drawdown between 2008-Present. I would love to crank up the Sharpe Ratio on the strat. I would also appreciate your feedback and criticisms of the validity of this strategy. Thanks!
Min-Variance Strategy Idea:
Our universe:
- VTI (Vanguard Total Stock Market Index Fund)
- VXUS (Vanguard Total International Stock Index Fund)
- VNQ (Vanguard Real Estate Index Fund Investor Shares)
- BND (Vanguard Total Bond Market Index Fund Investor Shares)
- GLD (SPDR Gold Trust)
- EFA (iShares MSCI EAFE ETF Europe Australia Far East)
- TLT (iShares 20 Plus Year Treasury Bond ETF)
- IEF (iShares 7-10 Year Treasury Bond ETF)
- QQQ (Tech ETF)
Choose the top 4 ETF's with the greatest returns in the past 180 trading days. Take these 4 ETF's, analyze its standard deviations and covariances of past 20 trading days, and use these values to generate the Markowitz Min-Variance Portfolio derived from MPT.
Reanalyze and readjust the portfolio at the end of every month
GitHub Repo:
Vladimir
Not such an optimistic picture when backtesting the strategy over the past 5+ years.
Matthew Wang
Vladimir Yeah, it does not perform well against the past 5+ years, likely because the equities market has been very hot lately. However, equities may not always be hot and this Asset Allocation Strategy might help generate steady returns in other market conditions. This strategy beats the index when you backtest from 2008 because we are able to observe different market conditions.
My goal for Adaptive Asset Allocation is to reduce drawdown and generate slow+steady returns. Seems like this can protect you from the shakiness of the market by diversifying into various assets other than equities.
The returns are less than benchmark, but more stable. My next goal is to increase the returns.
Jack Pizza
I have a few ideas and am testing a few things on Portfolio visualizer message me got something to about 18% CAGR and 6% Drawdowns let's connect if you want to collaborate
Jack Pizza
how can we add stop loss orders to this, and multiple lookback periods would probably help performance a bit or at least lower drawdowns.
Dual Momentum is useless honestly the long term backtests hit like 40%+ drawdowns which no one shows because they using awesome things like Monthly DD lol.
Louis Szeto
Hi Jack Pizza
Stop-loss can be implemented by adding the below line in Initialize:
Best
Louis
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Jack Pizza
superb thank you
Jack Pizza
Also Louis Szeto I'm noticing this algorithm is being a little weird as opposed to the traditional schedule rebalancing, how can we change it to weekly instead of monthly?
Jack Pizza
nevermind seemed to have fixed it by adjusting schedule on at top and commenting out some of the last month stuff.
Jack Pizza
Louis Szeto doesn't that create a trailing stop? How do we do a regular stop?
Louis Szeto
Hi Jack
That was a regular stop, we also have a trailing stop risk management model. Check the docs and source code of the TrailingStopRiskManagementModel.
Best
Louis
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Jack Pizza
Louis Szeto
MaximumDrawdownPercentPerSecurity(0.02) is still a trailing stop in monitors the securities unrealized profit so it updates…?
pnl = security.Holdings.UnrealizedProfitPercent
if pnl < self.maximumDrawdownPercent:
it's basically a trailing stop at the security level instead of the full portfolio…. isn't it?
Louis Szeto
Hi Jack
Nope. It is an absolute stop. security.Holdings.UnrealizedProfitPercent refers to the percentage change of an asset's opening positions based on the average opening price.
But if you keep diluting your opening positions, this stop level would be unstable. In this situation, you'll need to place active orders to control each opened position.
Best
Louis
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Strongs
hello everyone, in 2022 the strategy also suffered a hard drawdown. Have there been any developments?
Matthew Wang
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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