Can anyone give me an impression of the direction I should move with these numbers? There a several guidelines for the contest, like lower volatility is better but I don't have a reference point from which to compare these things. Is a .47 volatility too high? Are there any resources for evaluating these numbers? (Thanks!)
Total Returns 220.5%
Benchmark Returns 51.2%
Alpha 0.14
Beta 3.94
Sharpe 1.90
Sortino 2.60
Information Ratio 1.49
Volatility 0.47
Max Drawdown 39%
A sharpe of 1.90 is already strong. It accounts for both returns and volatility, so as long as their ratio is fine, you shouldn't worry too much. To interpret a lot of those numbers (returns, volatility, max drawdown) usefully would require knowledge of how long a timeframe the backtest producing these numbers ran for. For a 1-month daily backtest, returns of 220% would be insane; for a 10-year backtest, they're pretty much what you might expect.
In any case, a volatility of 0.47 and a drawdown of 39% are large-ish, I would look at trying to lower those.
Most importantly though is that your beta is very large. A beta of 4 roughly means that for every 1% that SPY goes up or down, yours will go 4% up or down. That's not even very easy to achieve, and I'm kind of curious what you're trading to be so large! :P The stocks involved must be very strongly tied to the health of the market. Lowering your beta will almost certainly cause your volatility to decrease as well, because you will no longer be strongly tied to this other source (the market).
It was over 2.5 years.
Typical buys/sells (sanity check is this in the realm of normal):
2013-01-22
- Buys $184,836.69, Sells $66,562.36 (47 transactions)
2013-01-23
- Buys $127,232.57, Sells $39,002.42 (31 transactions)
2013-01-24
- Buys $218,283.15, Sells $14,734.08 (43 transactions)
2013-01-27
- Buys $162,412.86, Sells $87,564.96 (46 transactions)
*I'm also just using the set universe for the top 10% of stocks by volume. Also thanks for your comments they are quite helpful.
I would echo Andre's suggestions - to lower your beta and hedge your positions by going both long and short in the algo.
You can read more about these suggestions and then enter your algo in the contest to see it's performance in the leaderboard.
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