Algorithm Performance: 09/07/2022
Performance Rankings
The Market: +1.88%
Long Term Portfolio: +1.56%
Base Algorithm: +1.53%
Market Neutral: +0.51%
Experimental Market Neutral: +0.39%
Experimental Sector Neutral: -0.13%
Sector Neutral: -0.14%
What Happened And Why?
The first thing of note: our long term portfolio’s performance was in line with our expectations. We’re playing conservative with it - and today being bullish, it underperformed but still did well. This is a feature, not a bug, and I have no new thoughts about it.
Our base algorithm slightly underperformed, which is very much not intended behavior. With the previous change reverted, its much more in-line with what we expect to see, which is a great sign though.
Our long term portfolio was extremely consistent today. Of the 50 or so tickers included, only HOLX was down intraday today.
While it’s unfortunate that our base algo underperformed the long term portfolio today, I have a hard time complaining when our returns look like this. With the difference being just 0.03%, I’m prepared to write this off to bad luck. None of our technical signals work every time, and we’re prepared for this to happen some days.
I find it interesting that our sector-hedgers underperformed our market-hedgers today, when in backtesting that usually isn’t the case. The reason is predictable:
To nobody’s surprise, this happened because market hedging was less detrimental today - but not for the reason you might be expecting.
When market-hedgers outperform sector-hedgers on bullish days, we usually expect it to be because the market underperformed most individual sectors. That wasn’t the case today. The market was pretty middle of the road, and outperformed most of the sectors our market-hedgers remained exposed to (those being healthcare, consumer staples, and utilities). The reasons for the hedging results seen above come down primarily to the exposure of each ticker to sectors vs the market overall, and how we determine effective sector betas. That method of calculation is proprietary, but suffice to say that a different means of determination could have led to the sector-hedgers beating the market-hedgers.
All in all, I’m happy with our systems’ performance today. It would have been great to turn a profit with our sector-hedgers, but with the cards falling as they did, that was unlikely. Had we bought the whole portfolio and market/sector hedged it, we’d have made 0.36% and -0.17%, respectively. In that sense, none of our hedgers underperformed with their modeling. Our algorithm that did underperform its baseline (the base, ironically) did so very slightly.
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. Congrats to everyone who made money today, let’s keep it going tomorrow.
-Asher
