The following report was produced by our research team and we felt it was worth sharing for discussion and comment. The recent price action in crude oil prompted us to spend a little effort thinking about how to manage around negative prices.
The last few weeks have been some of the toughest in recent memory for investors, as we have observed an intense global market selloff that began in late February and continued into early March of 2020 (as of the writing of this report).
Quantitative investment researchers often seek uniquely optimal parameterizations of their strategies amongst a broad “robust” region of parameter choices. However, this ignores a critically important feature of investing – Diversification. By diversifying across many equally legitimate parameter choices – an ensemble – investors may …
We’ve spent a great deal of time in past articles discussing the merits of portfolio optimization. In this article we will examine the merits and challenges of portfolio optimization in the context of one of the most challenging investment universes: managed futures.
It is widely accepted among investment professionals that, while portfolio optimization has compelling theoretical merit, it is not useful in practice. Practitioners are concerned that optimization is an “error maximizing” ¹ process fraught with insurmountable estimation issues.
The true benefit of trend following is only realized when investors take advantage of the extreme liquidity and diversity of global futures markets to trade a wide range of markets across all major asset categories. Our analysis shows that an investor would have achieved more than double the risk-adjusted performance of a median equity trend strategy by trading a diversified strategy across many diverse markets.