New related paper to #5 – FX Carry Trade and #8 – FX Momentum
#5 – FX Carry Trade
#8 – FX Momentum
Authors: Olszweski, Zhou
Title: Strategy diversification: Combining momentum and carry strategies within a foreign exchange portfolio
Link: http://apps.olin.wustl.edu/faculty/zhou/O_Z_JHDF_2014.pdf
Abstract:
Hedge funds, such as managed futures, typically use two different types of trading strategies: technical and macro/fundamental. In this article, we evaluate the impact of combining the two strategies, and focus on, in particular, two common foreign exchange trading strategies: momentum and carry. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. Our analysis, which uses data spanning 20 years, highlights the potential benefits of achieving strategy-level diversification.
Notable quotations from the paper:
…