Recently I started to look a bit more closely at correlation. From any book/article on Modern Portfolio Theory, one can learn that diversification improves the return/risk ratio. Through adding assets the overall return/risk ratio of the total portfolio improves as it moves towards the efficient frontier. The main driver of this improvement is the diversification that is brought by (less) correlated assets. Triggered by this thought I started to look at correlation of assets and correlation of strategies
A post that has been on my to-do list for some time is analysis of the MSR indicator in a trading strategy. It is the follow up post of my implementation of the MSR indicator with my self-built Median() function in a dll for amibroker.
The analysis is built up in 4 steps:
1. Application of the MSR indicator to my broad universe of 25 ETF’s
2. Application of the MSR indicator a portfolio of the 25 ETF’s
3. Comparison of the MSR indicator as trend filter with other filters
The post is rounded up with the Amibroker code – QD –