This is a summary of links featured on Quantocracy on Monday, 08/23/2021. To see our most recent links, visit the Quant Mashup. Read on readers!
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Correlation Matrix Stress Testing: Shrinkage Toward an Equicorrelation Matrix [Portfolio Optimizer]Financial research has consistently shown that correlations between assets tend to increase during crises and tend to decrease during recoveries1. The recent COVID-19 market crash was no exception, as illustrated on Alvarez Quant Trading blog post Correlations go to One for both the individual constituents of the S&P500 and several broad ETFs commonly used in tactical asset allocation
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The Best Systematic Trading Strategies in 2021: Part 2 [Quantpedia]The year 2021 has been an incredible year for passive equity investors so far. However, in the first part of our article, we talked about quantitative strategies which achieved even better results in 2021 than passive US equity investors. Indeed, there do exist such strategies, at least definitely in Quantpedias database of 650+ trading strategies. We focused the first part of the article more
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Building a Long Volatility Strategy without Using Options [Factor Research]Long volatility strategies can be built without using options Securities can be selected on different risk metrics like the VIX or high yield spread Although portfolios differ, the strategies exhibited similar trends INTRODUCTION We started our exploration of long volatility strategies by analyzing the Eurekahedge Long Volatility Hedge Fund Index and highlighted that this would have provided
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Macro trends for trading models [SR SV]Unlike market price trends, macroeconomic trends are hard to track in real-time. Conventional econometric models are immutable and not backtestable for algorithmic trading. That is because they are built with hindsight and do not aim to replicate perceived economic trends of the past (even if their parameters are sequentially updated). Fortunately, the rise of machine learning breathes new life