Correlation of Strategies

Today’s post is a follow up of my previous post Looking at Correlation. In the first post I looked at correlation of the 7 ETFs that are used in the WTAA strategy that is one of the featured strategies of this blog.  I provided Amibroker code to create a correlation table and code to create a correlation indicator.
In this post I will be exploring the correlation between the 3 strategies described in the blog: WTAA, MEOM and DVI strategy.

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MSR Strategy

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
4. Conclusion

The post is rounded up with the Amibroker code   – QD –

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My thoughts on “Go-In-Cash”

Most of my systems tend to be market-timing strategies. That is, they enter the market and usually exit within a couple of days. This has the benefit of having limited exposure in the market and during non-trading periods the capital can be used for alternative strategies/investments. However, I have noticed that even when running several strategies, I am in cash a significant moment of the time.

My main worry is that during those periods, I do not generate a return on my capital. Yes, theoretically one could be getting some interest on their savings account, however as I need my cash to be ready-to-go-in at all times, I need to keep it at my IB account. And IB does not give interest on this account. So I started to play around with the thought of moving into a low risk asset class as an alternative to moving money into a savings account (which in reality I am not able to do – it takes two days to transfer money from IB to my Dutch savings account and another 2 days to get it back).

Having a preference for trading ETF’s, I ended up with the idea to go long in a fixed income ETF during the times that my strategy is in cash. The ETF’s that I have selected are SHY (iShares Lehman 1-3 Year Treas.Bond), IEF (iShares Lehman 7-10 Yr Treas. Bond) and TLT (iShares Barclays 20+ Yr Treas.Bond).

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DVI system (2/2)

In the second post on the DVI system, I will explore some effects on portfolio trading this strategy. In the table below I have summarised the performance results of the various stages of the system as well as the top 3 performers of the DVI system as I left it in the earlier post.

I like this strategy as it has been constructed based on simple rules, it works across a broad set of different trading instruments and it has shown a decent performance in the period 1/1/2003 – 1/8 2010 without optimizing the parameters. So what would be my way to trade this strategy? Would I invest in the best performing instruments or in the top 3 or …? In trying to answer these questions, my view is that we are stepping into the domain of strategical asset allocation and portfolio management. In an earlier post I emptied my head on these subjects and decided to start trying out some stuff. So here goes my first experiment.

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