Hi,
I'm building an algo that accomplishes:
- Follows a different strategy for longs and shorts.
- Some of the factors are applied as filters, reducing the universe.
- Some of the factors are processed (ranked) and added altogether.
- Is market neutral.
- Uses order_optimal_portfolio and TargetWeights.
I've built the skeleton and implemented some factors just as a first draft (not focused on returns for now, just on coding the strategy):
Short:
- First, filters low profitability stocks.
- Second, filters expensive companies (using the profitability result as a mask).
- Once we have the stocks to trade, weights are defined by adding high volatility and low momentum.
Long:
- This part of the portfolio (50%), in the example just hedges longing the S&P.
Some doubts or things that came to my mind while building it:
- Being profitability the first filter factor, should it be the most emphasized?
- Regarding factor addition, in other discussions I've read that something similar to what I do here does not provide real additive quality but just average between two factors. Which are typical techniques for proper factor addition?
- Any other feedback on the approach is really appreciated.
Thanks in advance.
