I’ve been exploring the benefits of adding a managed futures strategy to the ROBUST Value/Momentum strategy I discussed in this post. To that end I implemented the 50 day breakout strategy described in Andreas Clenow’s book ‘Following the Trend’. The strategy was implemented on another trading platform, however I was able to import the results into a research notebook and integrate them with the returns of the value momentum strategy.
I thought the results as well as the technical details of importing the results and combining them with a Q strategy would be interesting to folks on the forum so I’ve published the notebook.
In my opinion the results are interesting from a portfolio management perspective since they illustrate how the risk adjusted returns of a portfolio can be improved by combining two uncorrelated strategies. The Sharpe ratio of the combined strategy is 1.01 as opposed to .84 and .72 respectively for the Value/Momentum and Managed Futures strategies. Also, looking at the monthly and annual returns charts the combined strategy has much smoother returns and doesn’t lose money in any year. On the other hand I’m not sure the smoother returns would necessarily make the strategies easier to trade since the managed futures strategy is quite volatile and has some impressive one day swings.
Lastly, I included analysis for a restricted version of the managed futures strategy that only trades currencies and e-mini contracts. This is perhaps a more realistic strategy for smaller accounts. The returns to this strategy are reduced but the diversification benefits are similar.
With respect to cloning the notebook, I suspect it won’t work because it relies on data uploaded to my local data directory.
