Asset Rotation Strategy With Python
Applying Trend Following For Defensive Investing
I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. — Stanley Druckenmiller [1]
Back when I started learning about investing, I was interested in global macro. From studying strong traders in that style, Stanley Druckenmiller and George Soros came up. Even though global macro is not as popular as it once was, I believe that certain gems can still be applied to future trading strategies. The quotes above are one takeaway. If you think you’re right about trade with high confidence, then maximize your reward. In this article, the strategy covered will be global macro — just kidding; it is going to be about asset rotation.
Asset Rotation Strategy
Asset rotation has an assumption that different assets move differently at any given time. From a fundamental viewpoint, you would think this makes sense since different assets deliver returns through varying means. Asset rotation’s main purpose is to lower the downside of market recessions [2]. For example, if we take a portfolio composed of stocks and bonds, then during a market downturn the portfolio would shift from…
