Hello all,

What have we accomplished in the last month?

– A new important Crisis Hedge Quantpedia Pro report
– 10 new Quantpedia Premium strategies have been added to our database
– 10 new related research papers have been included in existing Premium strategies during the last month
– Additionally, we have produced 10 new backtests written in QuantConnect code
– And finally, 12 new blog posts that you may find interesting have been published on our Quantpedia blog in the previous month

Numerous new businesses are emerging related to autonomous traffic, clean energy, biotechnology, etc. Without any doubt, these new companies look promising and at least the technology behind them seems to be the future. Moreover, this novel trend is also supported by the most prominent index creators S&P and MSCI. Both providers have created numerous thematic indexes connected to these hot industries. The popularity has caused that ETFs are nowhere behind, and as a result, these thematic indexes could be easily tracked. However, popularity itself does not guarantee the best investment, and we should be interested in these indexes in greater detail. A vital insight provides the novel research paper of Blitz (2021). The findings are interesting – the thematic investors bet against quantitative investors or, more precisely, against the most common factors that are well-known from the asset pricing models.

In part 1 of our article, we analyzed tendencies and trends among the Top 10 quantitative strategies of 2021. Thanks to Quantpedia Pro’s screener, we published several interesting insights about them.

In part 2 of our article, we got deeper into the first five specific strategies, which are significantly outperforming the rest in 2021. 

Today, without any further thoughts, let’s proceed to the five single best performing strategies of 2021 as of August 2021.

As we have mentioned several times, the best course of action for a quant analyst who wants to develop a new trading strategy is to understand a well-known investment anomaly/factor fundamentally and then improve it. Quantpedia is a big fan of transferring ideas derived from academic research from one asset class to another. But that’s not the only possibility of improvement – we can try to embrace Roger Ibbotson’s theory of popularity, which states that popular assets/securities are usually overpriced compared to less-known (exotic) assets/securities. Additionally, more professional investors usually follow popular assets, and this market segment is probably significantly more efficient.

So, we went in this direction. We took a well-known commodity momentum factor strategy and investigated its performance among commodity futures that were part of the S&P GSCI respectively BCOM commodity indexes and then compared the strategy’s performance with a variant that traded only non-indexed commodity futures. As we had expected, the trading strategy using exotic assets performed significantly better.

A lot of attention is centred around inflation in the academic literature. If the inflation is low and oscillates around central banks’ targets, there is not a big fuss around it. However, when inflation gets high, it becomes a hot topic among investors.

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.