Should these funds behave completely opposite?

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Should these funds behave completely opposite?

Aaron Jean-Baptiste

edited Mar 15, 2018

Seeking Help Using Data Tools and Tips Research Case Studies

Suppose I open two new funds, Long Fund and Short Fund, and receive a $1m investment into each.

The Long Fund has a strategy of buying as much of AAPL as it can every quarter. To do this (although counter-intuitive), the fund will sell all of its shares in AAPL, then use all of its cash to purchase as much AAPL as it can. The Short Fund follows the exact same strategy but in reverse:

Long Fund sells (if it is currently held) every quarter, and then purchases AAPL.
Short Fund buys (if it is currently short) every quarter, and then shorts AAPL.

Now, assume the short fund has a broker willing to lend shares to the fund but if the fund had enough margin to cover 100% of the stock's price when the position was opened. The broker will also make no margin calls. Further, assume there are no commission fees, and the funds both Buy and Sell securities at Mid.

Will the two funds exhibit perfect negative correlation and have the same return profile? I'm trying to compute just that but I cannot find the settings to make buy and sell prices equal to mid.

Many thanks,

Aaron

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.