September Results 2011

I have been working on some adjustments of the model where we improve returns considerably with a bit more volatility. The adjustments are due to changing the weighting schemes applied to each ETF strategy to be less dynamic ie the weights are not adjusted daily the idea here is to avoid sharp migrations in the weights on a daily basis. This well also reduce transaction costs. Enclosed find the summary results note that the annual Sharpe Ratio on average is 2.87 which is favorable for a strategy using daily prices.

Summary Of Results for Intermediate Model Aug 2011

Enclosed find the summary performance through the end of Aug 2011. Overall the strategy has performed well since inception in 2005 with a max drawdown of approx 1.7% from high to low. The reason for this is because the strategy carefully weights each particular ETF (proprietary weighting scheme) and may be half in cash at any given time. The average rolling 12 mth sharpe ratio exceeds 3.5. I can provide mthly results but in this table I am producing annual to date.

New Long Positions Established

On August 18th my models went long at the close on the following assets
ETFs EWZ, QQQ, OIH, SPY, EWJ, XLF. As of Aug 22 the system is down just over 6% which compares favorable with both the SP500 and the QQQs which are down 12.84% and 13.4% respectively. The massive EEM ETF faired even worse down over 15.8%. The last time this particular model saw such a down-turn was in 2008 where the downturn was even more pronounced. Remember that the idea was to create a model that has robust returns but avoids some of the major downturns. Now the volatility can be controlled by adjusting the amount of money an investor allocates in the model and the amount allocated to cash. Now that everything is more automated I will be updateing my positions more frequently.

Legal Disclaimer: Note that I am not a registered investment advisor so anyone using my trading signals does so at their own risk. This is not an offer to buy or sell securities

Summary Of Results through Aug 12 for intermediate model

The average annual return since inception in July 2005 is 18% with an average sharpe ratio of 1.87; The average winning month is 3% and the average losing month is 1.5%; Winning months outperform losers 2:1. For 2010 we were up through the end of July but are now flat due to an almost 5% drop in August. This also reduced our rolling sharpe ratio due to the sharpe increase in volatility in early august. However over all this model has been fairly robust since inception and held up well in 2008 relative to market indexes. It has performed well in August on relative terms given the extremely high level of volatility and the problems spreading through the euro-zone as well as the political stale-mate in washington. The table below indicates the summary results

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Current Trading Signals

Below is a list of my current signals for each ETF that I currently follow and the date on which they were received.  Note that I get my signals on the close of a particular day and I follow highly liquid ETFs this makes for a scalable strategy.   The next phase of development is to come up with a tactical asset allocation model based on the ETFs I am tracking, Im not there yet but im giving a lot of thought as to the best way to implement it.  

XLF   Long on 06/01/2011   @ 15.31
EWJ   Long on 06/15/2011   @ 10
EWZ  Long on 06/06/2011   @ 73.01
FXI    Long on 06/01/2011   @ 44.48
SLV   Long on 06/01/2011   @ 35.75
SPY   Long on  06/15/2011  @ 126.39

QQQ, OIH, EEM, GLD are giving no signal at the moment.   I realize that there are a wide range of ETFs that are also fairly liquid but I have focussed my attention on some of the largest ones.   Also I cover a fairly broad spectrum of the markets for example Brazil, the emerging markets block, China, SP500, Nasdaq, Silver, Gold and Japan.   I hope to add a few bond and currency ETFs just to see how my models performs there.    Note these are signals determined based on my Intermediate Mean Reversion Methods. 

Note I should qualify that I am not a registered investment advisor and I am not making any recommendations to buy or sell securities.

Updated Intermediate Model Results Table

I added two new ETFs to my Intermediate Mean Reversion Model.  If anyone wants any more details on results for any of the individual ETFs feel free to ask me.

Results For Intermediate Models

Above find the results for my "Intermediate Mean Reversion Models".  This is a summary using data back to Feb 2 2002.  The reason I chose that date was for consistency.  All of the ETFs considered had data going back to at minimum this date and they were among the most liquid actively traded ETFs.  The reason I of course select the most liquid ETFs is for ease of scalability.  In each instance the Strategy Volatility for the Model is considerably less than for the underlying ETF.   I also include the returns of a long only position in the SPY ETF for comparisons sake.  I have more data available for each individual model upon request.