Tristan Rhodes .
You are absolutely right: there is a strong reward for algorithms that have low volatility.
You should add to yours diagram Green and Blue badges.
"Beta to SPY" is not unique .There is squared volatility inside.

https://www.quantopian.com/posts/for-contest-scoring-why-does-volatility-matter-if-we-already-have-sharpe#55a2f4892cc61cfc1000014f
https://www.quantopian.com/posts/august-contest-rules-update-new-prizes-staying-hedged-going-longer#55af8265e179fe9fbf0003aa

UPDATE: I made an error when I said Sortino was replacing Sharpe. The real change is that Sortino will replace Calmar.

I also color-coded my diagram so it is easier to see the relationship between Volatility = Red, and Return = Blue. Ranking metrics that includes both components is colored Purple.

Vladimir, Thanks for sharing your insights, I agree with much of what you say. I see that your algorithm is currently in 5th place, congrats! Is this the algo you made to prove that the rankings are too heavily skewed towards stability? (Your backtest had annual returns of 0.05%)

Do you think that someone can convert a high-return algo into a low volatility algo simply by reducing the amount of leverage used? (For example, leverage = 0.10)

Nice diagram.
Beta= covariance/variance
variance= volatility*volatility
So it will be right to put it along with stability and paint it red.

Reducing leverage is the way to get higher score in Quantopian open now but there is the limitation.
Annualized return should be more then yield on 10 Year US treasury bond which Quantopian use as risk free rate.

Thanks for explaining Beta. Because Volatility is in the denominator, is it accurate to say that Beta is inverse to Volatility? Meaning, a high volatility would create a low Beta? If this is the case, should I update my conclusion such that 5 rankings are positively correlated to Volatility, and 1 (Beta) is inversely correlated to Volatility? The summation of these is that 4 rankings are positively correlated to Volatility and 3 are positively correlated to Return. (4, 3 is more balanced than 5,3)

Regarding adjusting leverage to optimize score, 5 of the top 6 scores have a backtest annualized return between 10% and 16% (your algo is the exception) . Perhaps that is the sweet spot? This means if my algo has an annualized return of 30%, I would improve my contest score by using leverage of 0.33.

Tristan ,
The relation between beta and volatility not as simple as you trying to implement.
Beta much more depend on correlation to market.

@Tristan - You might want to add arrows, with X->Y meaning "X influences Y" or "Y is based on X".

Max Drawdown is related to Volatility. Low Volatility = Low Max Drawdown.

I disagree with both statements.

Imagine an asset whose price decays exponentially at a constant rate. Then, whether you look at it in continuous or discretized time, the returns are constant, and so the volatility is 0. But the drawdown can go as close to 100% as you want, if you wait long enough - and it need not be long, if the decay rate is high enough.

@Tristan - If you take your "primary question" to its logical extreme, you could lower your leverage to 0 and not trade at all. Then you would have 0 returns, 0 volatility, and a Sharpe ratio that says Sorry - something went wrong.

These parameters compete with each other making
you think

if cash = 100%:  
    you can win  

But there are other rules which will make things even further difficult.

1. Algo must be hedge at all time
   
2. It must be actively traded. (Coming soon-even if your Beta is low and returns are reasonable)

I just cloned an algo from the Q series "Art of not following the market"
and ran it over longer period and it became:
"Art of not following the market and
not making any money"

Hi Folks,

Does the max drawdown have a trail or decay? One of my algos has had a drawdown of 4.5%.

Once that happens, it seems like it is permanently cursed in that ranking area - I could restart the algo to have that 4.5% go away, but that seems sort of silly - ultimately, I won't score well in that area regardless of the future.

Do the rankings have any decay/reset to the weighting of the max drawdown?