Algorithm Performance: 10/25/2022
Performance Rankings
The Market: +1.62%
Long Term Portfolio: +1.19%
Base Algorithm: +1.13%
Market Neutral: +0.14%
Experimental Sector Neutral: +0.08%
Sector Neutral: -0.08%
Experimental Market Neutral: -0.31%
What Happened And Why?
Only the base algo and EMN underperformed their baselines today. That gives us a pretty solid 3/5 win rate today. Granted, everything we have underperformed the market, but with our more conservative strategy these days, that’s to be expected. I’m fairly happy with our performance today - this is a win for us.
Big News
I’m hoping to push the following changes by the end of this week. I’ve been talking things over with the other HK staff, and we’ve reached a decision.
Between live testing and backtests with our new system, Experimental Market Neutral and Market Neutral perform fairly similarly, same with Experimental Sector Neutral and Sector Neutral. With this in mind, we don’t think there’s a reason to keep all 4 running. We’ll be making Experimental Market Neutral available to everyone, and retiring Market Neutral (EMN slightly edges out MN in backtests). We’ll be leaving Sector Neutral where it is and retiring Experimental Sector Neutral (SN beats ESN in backtests, with our new system).
So that leaves us with 2 extra slots for algorithms - what to do with them? I’m going to be rolling out 2 new algorithms: Variable Market Hedged and Variable Sector Hedged. One thing I’d like to improve about our algorithms is how much they hedge. Our algorithms all hedge either nothing at all (base algo) or 100% of the exposures they can see (market and sector neutrals). This means that at market open, when it’s time to decide a portfolio for the day, we’re pretty limited in our options.
That’s where VMN and VSN will come in. Each day at close, we’ll send out a poll asking responders to rate how bullish they feel on the market the next day, on a scale of 1 - 100. Based on the average response, the variable algorithms will determine how much they want to hedge. On days where we’re really bullish, they might hedge almost nothing. But if the responders feel more bearish, the hedging will get more aggressive. This will give us (and our users) more of a gradient on how aggressive they want to play the algo each day.
For the time being, the polls will only be sent to HK staff, and the variable algorithms will be in the beta algorithms channel. If things go well, we’ll look to expand access to the algorithms and cast a wider net for the poll.
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. Thank you for reading, and best of luck trading tomorrow.
-Asher
