In and Out Strategy: Part 2: The End
In Portfolio: (QQQ,IWB) versus Out Portfolio: (XLE, GLD)
TL;DR: Ok…we are closing down this virtual strategy for lack of performance and current lack of belief in it’s economic thesis. We are in the process of moving on to strategies involving a mix of quant, fundamentals and AI analysis and modeling, so stay tuned…we’re excited by the preliminary results and our new tools!
Please scan our first article about trading this strategy
It started well, yet this algo traded strategy has not held up in the market downturn this past year. Also, in retrospect, even with inflation, there is no OUT portfolio that makes any sense except right now except Cash.
We changed the Cash Alternative OUT portfolio to (XLE, GLD), to reflect the current environment of inflation plus war. Bonds are systemically underperforming, so we swapped them out for XLE as a way to maintain a healthy cash-alternative inflation-cognizant OUT portfolio…with, of course more risk and volatility! In retrospect, this wasn’t a great choice either for the OUT portfolio
Here is our description of the moves made and the performance of our Collective2 In and Out tracking portfolio:
See our detailed article on this strategy:
10/29/2021 Our signal changed to In 5 days ago. We are long QQQ and IWB, equally weighted. Historically, this is the time to make money. We are also changing our Out to be all Out(TIPS) for now, due to instability in Out(GLD, IEF) as proxies for a cash-like alternative.
01/31/2022 Signal went to OUT. Transferred to equal weight in TIP, IEF,GLD, LQD for Cash Alternative
03/31/2022 Signal went IN(QQQ, IWB). Also changed Alternative to energy and gold.(XLE, GLD)
05/03/2022 Signal went OUT((XLE, GLD). Underperformance due to SLV/GLD ratio being abnormally high. For ratio values, backtest returns,and signals, see our telegram channel.
HCA Telegram Channel
https://t.me/hotchilianalyticschat
The performance for the Collective2 strategy is also worse because it is using a leverage of 1.1, which was not my intention, yet is there. The chart for this strategy is:
We are also trading this strategy live on Interactive Brokers, yet started it months before the Collective2 strategy, and end up having less loss and drawdown. The signal is essentially the same though we decided to change the OUT portfolio to equal-weighted (XLE, VTIP, SGOL, SHV) to reduce the risk of holding too much XLE and Gold. We also decided to add in a small amount of Bitcoin ($BTC). The Bitcoin asset is being considered as a form of cash currently, so we haven’t modeled it’s effect.
We are also transitioning, for backtests, from zipline-broker to zipline-reloaded for our future toolchain, as that has a more robust presence, and is easier to install. For live trading off of zipline-reloaded, we still thinking about that….either integrate in the live-trading modules from zipline-broker, or create a separate live-trading module from the backtesting toolchain.
No lie, it is hard to report negative news on such a simple algo trading bot, yet we have continued to trade this strategy up to this point, modifying the execution via the asset mixture and changing the threshold(≥1.0 = Lower Risk, Lower Returns, <1= Higher Risk, Higher Returns).
We are now ending our tracking of this strategy, and are excited to move on to algorithmic portfolio construction involving fundamental measures, combined with quantitative and artificial intelligence tool chains! Yes, more complicated, yet hopefully more realistic.
FYI, check out the podcasts and we are actively following while on our walks and bicycle rides:
