Weekly Algorithm Review: 09/02/2023 to 09/08/2023
Performance Rankings
Sector Neutral: -0.17%
Overall Market: -0.29%
Market Neutral: -0.66%
Variable Sector Neutral: -0.68%
Base Algorithm: -0.74%
Variable Market Neutral: -0.78%
Long Term Portfolio: -0.83%
The algorithm finishes its first week of the quarter in the black. A 9 bps out-performance is certainly nice, but statistically speaking, not a big deal. The portfolio however, under-performed the market by a much larger margin.
(Sector allocations of the S&P 500)
The reason for this under-performance from the portfolio lies in its makeup of defensive sectors. Our portfolio over-allocates into Healthcare, Utilities, and Consumer Defensive relative to the S&P 500. All of these sectors under-performed when compared to Technology and Consumer Cyclicals - the 2 sectors we under-allocate into the most.
There weren’t 1 or 2 specific stocks that dragged the portfolio down this week - so I remain confident in our fundamental analysis on each company. It seems that our bearish stance on the market didn’t serve us well. And in fairness, the market was down this week - just not enough to see defensive sectors shine.
The algorithm tells a different story this week. Last week, in our quarterly review, I noted that our current portfolio didn’t contain many standout tickers - ones the algorithm wanted to make large allocations into. This week, however, we got a few. MPC is the most obvious here, but UNH (and to a lesser extent DG) also received large allocations. I can’t say whether this will continue - there’s no real way to predict that - and it’s also too early to tell whether this will be a positive development. All I can say at this time is that, this week, for the first time in a while, we had some major standout tickers. And looking at their performances, they’ve been a net positive. Only MPC performed well, but it did well enough to outweigh the losing standouts, and then some.
As for the hold on the algorithm: I’m becoming more positive on releasing it. If we have a strong performance this coming week, that’ll probably be my cue that it’s time to drop it. Performance has improved since reverting to our original system some weeks ago, which has been a good sign.
What’s In The Pipeline?
Testing is ongoing with our new intraday bot. After 1 week of paper trading, it’s come out profitable. Tentatively, we’re going to paper trade 1 more week before we look to release it.
Misc. Data For The Week
