Algorithm Performance: 09/06/2022
Performance Rankings
Experimental Sector Neutral: -0.27%
Sector Neutral: -0.52%
Experimental Market Neutral: -0.6%
The Market: -0.6%
Long Term Portfolio: -0.74%
Market Neutral: -0.85%
Base Algorithm: -0.92%
What Happened And Why?
If you’ve been following our algorithm reports, today’s results will look totally out of whack. The base underperformed the long term portfolio, and market neutral underperformed the market - on a day the market was down.
The explanation for this is fairly simple: today, our algos all recommended far fewer tickers than usual. For this reason, we fell into what some statisticians call The Law of Small Numbers.
The Law of Small Numbers roughly states: as the number of samples decreases, the likelihood of deviations from the mean increases. To elaborate on this, consider the following. Let’s say I roll 100 fair dice - what are the odds at least half of them come up a 6? Almost zero. Now, let’s say that instead of 100: I roll only 2 fair dice. Now the odds that at least half come up a 6 are more than 30%.
Since we allocated into so few tickers today, our results were going to be much more volatile than usual. This is why our rankings deviated so strongly from what we normally expect to see.
This lower number of recommendations is the result of the change I pushed this weekend. Based on some examination, it will usually only recommend this many. This is something I didn’t catch during initial testing, and will be reverting. We apologize for any inconvenience this caused, our returns should be more consistent starting tomorrow.
Tomorrow’s Outlook
The full algorithm reports will be published tomorrow morning, once Allen has had a chance to vet its recommendations. In the meantime, here are our tentative exposures for the trading day tomorrow:
That’s all for tonight, let’s hope for a market turn around tomorrow.
-Asher
