Theory of portfolio management

Extending Historical Daily Bond Data to 100 Years

18.May 2022

Finding a good data source with quality data and long history is one of the greatest challenges in quantitative trading. There definitely are some data sources with very long histories. However, they tend to be on the more expensive side. On the other hand, cheap or free data usually lacks quality and/or has shorter time frames.

This article explains how to combine multiple data sources to create a 100-year daily data history for US 10-year bonds. Having a 100-year history of daily data can be very beneficial to understanding the market patterns and analyzing history and extending backtests to arrive at a new source of out-of-sample data.

Furthermore, suppose you want to examine how your portfolio would have performed during various historical events or to backtest a strategy during multiple market phases. In that case, the long history provides more opportunities. Besides, investors are always on the run to better understand the market. So, having substantial knowledge of history is crucial.

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Beware of Excessive Leverage – Introduction to Kelly and Optimal F

26.February 2022

Most investors focus solely on the profitability of their investment strategy. And, even though having a profitable strategy is important, it is not everything. There are still numerous other things to consider. One of them is the size of the investment. The investment size can increase or decrease the profitability of a strategy, so it is essential to choose it right. The following article is our introduction to Kelly and Optimal F methodologies, that underlies our upcoming Quantpedia Pro report.

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Introduction to Dollar-Cost Averaging Strategies

31.January 2022

Most of you have probably heard the saying that somebody “averaged” into or out of his investment position. But what does it exactly mean, and what different dollar-cost averaging strategies exist? We plan to unveil our new “Dollar-Cost Averaging” report for Quantpedia Pro clients next week, and this article serves as a short introduction to this term.

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How to Combine Different Momentum Strategies

15.November 2021

Today we will again talk more about the portfolio management theory, and we will focus on techniques for combining quantitative strategies into one multi-strategy portfolio. So, let’s imagine we already have a set of profitable investment strategies, and we need to combine them. The goal of such “strategy allocation” usually is to achieve the best risk-adjusted return possible. There is no single correct solution to this task, but there are a few methods that we can try.

The “appropriate combination” highly depends on the type of strategies we are about to combine. Are we combining equity and bond strategies together? Are we combining equity strategies, with each one having an entirely different logic? Or do we rather need to assign weights to strategies that are similar in nature yet still different? We will focus this article on the last option – combining similar yet different strategies.

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An Introduction to Value at Risk Methodologies

29.October 2021

Understanding the risks of any quantitative trading strategy is one of the pillars of successful portfolio management. Of course, we can hope for good future performance, but to survive market whipsaws, we must have tools for sound risk management. The “Value at Risk” measure is such a standard tool used to assess the riskiness of trading and investment strategies over time. We plan to unveil our new “Value at Risk” report for Quantpedia Pro clients next week, and this article is our introduction to different methodologies that can be used for VaR calculation.

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Three Simple Tactical FX Hedging Strategies

8.October 2021

There are many ways one can lose money when investing, and exchange rates are one of the potential risk factors. Luckily, there are several ways to minimize this type of loss in your portfolio. Systematic FX hedging that uses currency factor strategies is a way of protecting an existing or anticipated position from an unwanted move in an exchange rate. It does not eliminate the risk of loss completely but helps to manage currency exposure better.

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