Our new article investigates “rebalancing premium” or “diversification return” in cryptocurrencies which can be achieved by periodically rebalancing portfolios. We analyze whether the daily/ monthly rebalanced portfolios outperform a simple buy-and-hold portfolio of cryptocurrencies and under which conditions. Additionally, we also look at the various combinations of volatile cryptocurrency portfolios with low-risk bonds.

In the first part of our article, we talked about quantitative strategies which achieved even better results in 2021 than passive US equity investors. Then, we focused more on tendencies and trends among the best quantitative investment strategies. Today we will talk more deeply about specific trading strategies and shortly describe number #10 to number #6 of the best quantitative strategies of 2021.

Can we explain stock momentum by industry, sector or factor momentum? Moreover, a similar question could be raised about the short-term reversal. The novel research by Li and Turkington (2021) uses a robust regression model to divide momentum and reversal returns into the main drivers. The individual momentum anomaly that broader market groups do not fully explain exists in the whole sample but is statistically weak. On the other hand, the reversal anomaly is highly significant. Secondly, the traditional 12-months momentum can be better explained by the factor momentum than the industry or sector momentum. Still, the industries, industry groups, sectors, and even factors have distinct drivers, and the anomalies seem different.

Short-term mean reversion trading on equity indexes is a popular trading style. Often, price-based technical indicators like RSI, CCI are used to assess if the stock market is in overbought or oversold conditions. A new research article written by Chainika Thakar and Rekhit Pachanekar explores a different indicator – TRIN, which compares the number of advancing and declining stocks to the advancing and declining volume. TRIN’s advantage is that it’s cross-sectionally based and its calculation uses not only price but also volume information. Thakar& Pachanekar’s research paper is useful for fans of indicator’s based trading strategies and offers a short introduction to TRIN’s calculation together with an example of mean-reversion market timing strategy written in a python code.

Authors: Chainika Thakar, Rekhit Pachanekar

Title: Trading Index (TRIN) – Formula, Calculation & Strategy in Python