## Overnight Risk

Why are overnight periods riskier? For one, you can’t use stops to limit your risk. But more importantly, the distribution of overnight returns has far more extreme negative returns than the intraday or close-to-close periods. Let’s take a look at…

## Problems in the Optimization of Swing Portfolios

Assume you have a bunch of different systems that trade stocks, equity index ETFs, bond ETFs, and some other alternative assets, eg commodity ETFs. All the systems take both long and short positions. What are the questions your portfolio optimization…

## Trend Followers Make Forecasts Just Like Everyone Else

This post was prompted by Michael Covel’s interview Traders’ Magazine in which he claims that trend followers don’t try to make predictions. This idea that trend followers do not forecast returns is widely and frequently repeated. It is also complete nonsense. Every…

## Visualizing the Similarity Between Multiple Time Series

Presenting the similarity between multiple time series in an intuitive manner is not an easy problem. The standard solution is a correlation matrix, but it’s a problematic approach. While it makes it easy to check the correlation between any two series,…

## Announcing QPAS: Open Source Performance, Risk, and Execution Analytics

When I was first starting out a couple of years ago I didn’t really track my performance beyond the simple report that IB generates. Eventually I moved on to excel sheets which grew to a ridiculous and unmanageable size. I took…

## Divergences: Yield Spreads and Size

And now for something completely different. A bit of macro and a bit of factor relative performance: what happens when yield spreads and small caps diverge from the S&P 500? High Yield Spreads First, let’s play with some macro-style data. Below you’ll…

## A Few Notes on System Parameter Permutation

Before you read this post, read the (Wagner award winning) Know Your System! – Turning Data Mining from Bias to Benefit through System Parameter Permutation by Dave Walton. The concept is essentially to use all the results from a brute force…

## Reverse Engineering DynamicHedge’s “Alpha Curves”, Part 2 of 3: K-Medoids Clustering

In the first part of the series we covered dynamic time warping. Here we look at clustering. K-means clustering is probably the most popular method, mainly due to its simplicity and intuitive algorithm. However it has some drawbacks that make…

## 2013: Lessons Learned and Revisiting Some Studies

The year is over in a few hours and I thought it would be nice to do a quick review of the year, revisit some studies and the most popular posts of the year, as well as share some thoughts…

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