Algorithm Performance: 09/12/2022
Performance Rankings
The Market: +0.54%
Base Algorithm: +0.28%
Long Term Portfolio: +0.26%
Experimental Market Neutral: +0.21%
Market Neutral: +0.15%
Sector Neutral: +0.09%
Experimental Sector Neutral: +0.09%
What Happened And Why?
There’s not much worth diving into today. The performance of the long term portfolio is within expectations. The base beat it, but by little enough that I’m considering it a tie. This is a good sign for future performance, but I’m remaining wary. Experimental market neutral outperformed its rival, as we hope to see. I’m considering sector neutral and its experimental version to be a tie today as well. While we don’t expect that normally, it’s not a significant deviation from what we do see in most backtests.
Sector hedging was only slightly worse for our whole portfolio today. With the market outperforming most of the sectors our market neutral algorithms are exposed to, the difference came down to how we approximated the sector betas of each ticker in our portfolio today. Interestingly, had we bought the whole portfolio and either market or sector hedged the whole thing, we would have lost money. This is a win for modeling today, with no major exceptions.
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:
Tomorrow is going to be interesting for us - CPI numbers are coming. I’ve been talking with our long term analyst Vlad, and we think CPI will be higher than the market is pricing in. We expect this to be bad for the market as a whole, but some of the more defensive sectors (Healthcare, Consumer Staples, and Utilities) to about break even or go up. Since those are the main sectors our market neutral portfolios are exposed to, we’re going to start the day with our experimental market neutral portfolio. Should CPI numbers come out on the lower end of our expectations, we’ll try to pivot to the base algorithm.
That’s all for tonight. Wishing everyone good luck tomorrow!
-Asher
