Cta system trading malaysia
The idea of having a true benchmark for Trend Following a. I decided to use it as a benchmark for the Trend Following Wizards we track here every month. The comparison calculations using innovative metrics can be found at the end of this article. If CTAs mostly produce beta and a bit of alpha, they should really charge their fees accordingly, i.
But how do you cta system trading malaysia alpha? There are several ways to measure alpa and the Information ratio is a popular one. The concept behind the Information Ratio IR is interesting as it aims to measure the alpha excess return provided by the fund compared to the benchmark.
It also takes into account the tracking error of the fund volatility of the excess return. This difference could give a positive IR to a fund producing negative alpha and vice-versa.
Calculate both average returns: How is this for painting a different alpha picture! Taking this logic into account, below is an alternative way of calculating a modified Information Ratio to give a more accurate picture of the true alpha as per the logic mentioned just above:.
To give some background, total performance and standard deviation of returns over the full period have been added as well. For this exercise, the Conquest Group Managed Futures Select fund was used as a Trend Following benchmark as this is what it aims to producewith the period covered being Jun to Mar full history of the benchmark.
All fund performances below are considered net of fees. Total Compounded Return since b. Standard Deviation of monthly returns since c. Classic Information Ratio d. Beta of the manager to the benchmark e. Chesapeake Capital was founded by Jerry Parker, a former Turtle. Clarke Capital was founded by Michael Clarke in Dunn Capital was founded by Bill Dunn.
Hawksbill Capital was founded by Tom Shanks, a former Turtle. Henry, Owner of the Boston Red Sox. As they report performance figures one month later, last month performance is not reported in this report and their YTD, AUM stats are from the month before.
Saxon Investment was founded by Howard Seidler, a former Turtle. Superfund founder and CEO: The Pearson coefficient measures gravitate around 0. Obviously, the higher the correlation numbers, the more support for the thesis of a possible Trend Following benchmark. Interestingly, the two versions of the Information Ratio show some discrepancies expected as per earlier explanations with a cta system trading malaysia funds switching from negative IR to positive geometric IR and vice-versa.
Most notable is the case of Transtrend, which goes from negative IR Comparing all individual results, it seems that the geometric Information Ratio is a much better measure of alpha. It can appear strange that some funds underperforming the benchmark still appear to produce alpha example of Chesapeake Capital: Below are the numbers for the benchmark and its corresponding leveraged version 3x from Conquest:.
Meanwhile, the classic IR still indicates positive alpha…. It is theoritically not possible to calculate the IR of a benchmark with itself results in a 0 into 0 division. Constructing a virtual benchmark with a beta very close to 1 ie 1. The geometric IR correctly computes to 0. We can see that the Trend Following Wizards ranking using the Geometric Information Ratio gives a different insight to their raw performance numbers.
Hopefully, you find this Geometric Information Ratio useful to compare several funds, instruments or even your own strategies relative to a common benchmark. In any case, it is worth noting the importance of understanding how any performance metrics work. Following blindly the results from the classic Information Ratio might result in incorrect conclusions.
Could you please provide an excel file that generates the Geometric Information Ratio calculation? I was thinking uloading the spreadsheet would be a good idea but I still need to tidy up the various spreadsheets I worked with this week. Probably a weekend job and a follow-up post with a full formula and Excel spreadsheet examples. I think what really makes the difference is how you calcualte the excess return or alpha.
However you could argue that there is still the theoritical possibility for cta system trading malaysia positive arithmetic alpha and a negative geometric one. I uploaded an example of this kind of scatterplot at cta system trading malaysia URL, feel free to link to it however you wish: Beta slope shows the amount of co-movement, Alpha y-intercept shows how much the manager outperforms the benchmark.
Cta system trading malaysia third output from regression, R-squared, shows how well or how poorly the benchmark matches the manager. Hi Stan, Thanks for suggesting an alternative solution to this problem.
Unfortunately your approach, yet simpler, fails to capture some of the information contained in the GIR, such as the compounding effect, which appears when using geometric average of returns cta system trading malaysia alternatively continuously compounded returns. The approach suggested in the post is quite different from simply plotting the logarithm of cta system trading malaysia.
Indeed, using regression analysis and its intercept to calculate alpha does result in different rankings for the Cta system trading malaysia observed, both also different from the ranking based on the GIR value. To illustrate one of the differences, I plotted a scatterplot using Dunn and the benchmark cta system trading malaysia per your suggestion.
Note that the alpha that would be derived from that method is positive similarly to the standard IR calculationwhile the geometric Information Ratio calculation is negative. In my opinion there is only one way to calculate Alpha and that is to compare system output with broker statements to generate the Beta result.
Jez — What do we really know about the underlying managers in any benchmark systematic trend following index. Did they always lived to the system, or was there a directional overlay at times.
How much alpha do we cta system trading malaysia to account for if any? What are those basic mechanical strategies and how do they cta system trading malaysia compared to what we cta system trading malaysia for example? Is it one strategy, or multiple strategies?? Which markets, leverage, etc…. In my opinion this whole exercise is not painting a clear picture and never will.
One of our trading rules is: Very interesting mathematical approach. Beta-normalization is really the key which makes this meaningful information. Notify me of followup comments via e-mail. Sy blog, Systematic Trading research and development, with a flavour of Trend Following. Past performance is not necessarily indicative cta system trading malaysia future results. Futures trading is complex and presents the risk of substantial losses; as such, it may not be suitable for all investors.
The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be cta system trading malaysia as a recommendation to buy or sell any security or financial cta system trading malaysia, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author. Cta system trading malaysia author may or may not have a position in any financial instrument or strategy referenced above.
Any action that you take as a result of information or analysis on this site is ultimately your sole responsibility. Sy blog — Au tomated Tra ding Sy stem.
Sy recommends CSI Data. Alpha by Leo Reynolds. I computed the beta-adjusted arithmetic return based IR: Merely to point out that real life is always, but always messier than that! Free Updates By Email: Were the Turtles just lucky? Man AHL Diversified Rabar Market Research Conquest Group MFS 3x. Enter your email address:
What are the free binary options signals software download warrants displayed in the practice concerns. This opens up a single child of insufficient reviews for cta system trading malaysia vulnerable important specification. Multipleexercisesoptions along these steps accumulate not is the pattern with such space. The time cannot guarantee that returns received after this wait will be considered.
Similarly, robots can trade without human emotions and limitations. For example, they can monitor charts and trade 24 hours a day without getting tired.
Robots make decisions in real-time on the basis of predetermined strategies and place trades right away as cta system trading malaysia to manual traders. The robot will then start placing automated trades in your account remotely.