Weekly Algorithm Review: 05/13/2023 to 05/19/2023
Performance Rankings
Overall Market: +1.17%
Base Algorithm: +0.11%
Variable Sector Neutral: -0.21%
Sector Neutral: -0.22%
Variable Market Neutral: -0.4%
Market Neutral: -1.04%
Long Term Portfolio: -1.47%
For the algorithm, this has been one of the best week’s we’ve ever had. To those unaware, the algorithm doesn’t look at every stock in the market. Instead, we take a list of pre-approved stocks, and feed them into the algorithm. Each day, it constructs its portfolio using only these tickers. If we feed the algorithm AAPL, TSLA, and MSFT, it will never recommend XOM.
The pre-approved list we use is our long-term portfolio - these are tickers we expect to outperform in the long run. Even though our system underperformed the market, it outperformed the tickers we fed into it by 158 bps. To me, this is a great sign for our algorithm. Even if our long-term macro thesis hasn’t been correct, the mechanical aspects are working fantastically. The algorithm works great, it just had poor stocks to pick from this week.
Our long term portfolio has underperformed primarily because it’s so defensive.
Our portfolio massively over-allocates into Utilities, Healthcare, and Consumer Defensive stocks. These represent sectors we expect to do very well this year. This week, however, they were the 3 worst.
The only real solution to this is to pivot to a higher beta strategy. Given our forecast of recession later this year, this isn’t a strategy we can sustain for the long term. As such, we’re looking into using portfolios with much shorter time horizons. We’ll touch on this further at a later date. The long-term modeling necessary to do this takes some time.
What’s In The Pipeline?
This week, we rolled out a new and much more user-friendly interface for the market game. This week, we’re following that up with an update to the grapher bot. We’ll be going from this:
To this:
This isn’t just big news for ease of use. You might notice a button in that screenshot for options. With a stronger interface, we can finally start adding options data to our grapher. I’ve given some previews on this before, but it’s closer than ever now. At this time, we’re expecting to push the options update early next week, with the grapher update early this week.
Stay tuned! I’ll have a preview of our options bot next weekend.
Misc. Data For The Week
