PORTFOLIO ANALYSIS

Metrics for evaluating the performance of algorithmic trading systems., Measure system correlation analysis, Monte Carlo analysis, Monthly performance

CORRELATION DATA - ALGORITHMIC  TRADING SYSTEMS

An algo trading system portfolio with systems that are highly correlated is a recipe for failure since the systems will all face drawdowns at similar times and  protection from down-turns will be reduced. However  a properly diversified portfolio where algo systems are sparingly correlated, like the Chimera bot, you minimise risk and drawdown.

Trading systems that are negatively correlated can smooth the resulting portfolio equity line.  If the equity lines are growing it means that the algo systems are suitable to trade that market.    A negative correlation coefficient of 0.2  or less is  considered good in order to lower the portfolio drawdown.

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YEARLY EQUITY CURVE

The equity curve is the standard tool for measuring performance of an algo system.  The equity curve refers to the cumulative return of the system over time.

 

A good automated algo trading system should break new equity highs every quarter so investors are not stuck in a hole with no profits for extended periods. Invest in Chimera automatic algorithmic systems  that generate profits for you.

Interact with the chart by hovering over data points or turning off data for certain years.

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CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under — or over — compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

*INDIVIDUAL ALGORITHMIC SYSTEM PERFORMANCE

Every Chimera algo system had profit factor greater than 1.8 since 2007. Moreover, a Sharpe ratio for each individual system has remained greater than 1.

The table shows all  key metrics for each system which indicate the profitable outcomes of  the Chimera bot (see below for ratio definitions).

All systems work on different time-frames and trade either long or short or both. The average win/loss for each system is very high which means our risk/reward ratio for each trade is strong. Looking at the % win rate for each system shows you that every system works very differently which is good for any portfolio. To have correlated results would be poor portfolio construction and system design.

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*2017 MONTHLY PERFORMANCE

Last year the market suffered from the lowest volatility on record. See how we performed in this unusual period.

Chimera Bot had another four winning quarters. The year started slowly as is to be expected during such a dull period.  We are market neutral & daytrade only so even with the extreme market bias to the long side in 2017 we still made money both Short and Long..

2017 proves how robust and resilient the Chimera Bot is, as to make good money in a dead market for daytrading systems is a difficult task. See our post: Why 2017 was a tough year for Quants.

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MONTE CARLO ANALYSIS

Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables.  Simply put, the Chimera bot equity curve  is reproduced a number of times by randomizing the same trades but in a different order. It is a technique used to understand the impact of risk and uncertainty in algorithmic systems; it produces an estimation of expected drawdowns and checks for possible worst case scenarios.

We applied 100,000 Monte Carlo simulations to the Chimera algorithmic system.  The change of the trade orders leads to the effect that between the equity curves there are big variations with different drawdown phases that occur at different times.  We produced the following results;

Smallest drawdown -$2,302

Base drawdown -$4,667

Largest drawdown -$11,526 (this was worst performance from 100,000 simulations).

 

Be wary of other bogus systems stating desirable Monte Carlo analysis outcomes as this type of analysis is only useful when applied to systems which have not been over-optimized or curve-fitted! Also keep in mind that Monte Carlo is a probability test, not a certainty test and assumes returns of markets follow a Gaussian normal distribution.  But the reality of financial markets means that sometimes there are some days with very huge percentage changes that are outside of the Gaussian curve which the Monte Carlo analysis cannot predict.

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Profit Factor

The profit factor is defined as the gross profit divided by the gross loss (including commissions) for the entire trading period

 

Annualized Sharpe Ratio

One of the most referenced risk/return measures used in finance. The ratio describes how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset. A Sharpe ratio of 1 or higher is commonly considered to be a good risk-adjusted return rate.

 

 

Sortino Ratio

The Sortino ratio is the excess return over the risk-free rate divided by the downside semi-variance, and so it measures the return to "bad" volatility. (Volatility caused by negative returns is considered bad or undesirable by an investor, while volatility caused by positive returns is good or acceptable).  A higher Sortino ratio is preferred because it means that the investment is earning more return per unit of bad risk that it takes on.

 

Calmar Ratio

The Calmar ratio is a comparison of the average annual compounded rate of return and the maximum drawdown risk.  It measures performance on a risk-adjusted basis. The lower the Calmar ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar ratio, the better it performed. A higher Calmar ratio indicates that a fund's return has not been at risk of large drawdowns. A lower Calmar ratio, on the other hand, suggests that the drawdown risk is higher. A Calmar ratio of more than 5 is considered excellent, a ratio of 2 – 5 is very good and 1 – 2 is just good.

 

Drawdown

Drawdowns help determine an investment's financial risk, it simply the negative half of standard deviation in relation to a stock’s share price. Maximum drawdown is a measure of the fund's maximum loss from its peak value. It is calculated by subtracting the lowest value from its peak value, and then dividing that figure by the peak value.

 

 

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DISCLAIMER: Commodity Futures Trading Commission Futures trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website or on any reports. The past performance of any trading system or methodology is not necessarily indicative of future results.

 

Unless otherwise noted, all returns posted on this site and in our videos is considered Hypothetical Performance. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

 

 

CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under — or over — compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

 

Statements posted from our actual customers trading the algorithms (algos) include slippage and commission. Statements posted are not fully audited or verified and should be considered as customer testimonials. Individual results do vary. They are real statements from real people trading our algorithms on auto-pilot and as far as we know, do NOT include any discretionary trades. Tradelists posted on this site also include slippage and commission.

 

This strictly is for demonstration/educational purposes. Quant Savvy does not make buy, sell or hold recommendations. Unique experiences and past performances do not guarantee future results. You should speak with your CTA or financial representative, broker dealer, or financial analyst to ensure that the software/strategy that you utilize is suitable for your investment profile before trading in a live brokerage account. All advice and/or suggestions given here are intended for running automated software in simulation mode only. Trading futures is not for everyone and does carry a high level of risk. Quant Savvy nor any of its principles, is NOT registered as an investment advisor. All advice given is impersonal and not tailored to any specific individual.

* Published percentage per month is based on back-tested results (see limitations on back-testing above) using the corresponding package. This includes reasonable slippage and commission. This does NOT include fees we charge for licensing the algorithms which varies based on account size. Refer to our license agreement for full risk disclosure.

 

Quant Savvy provides trading algorithms and indicators based on a computerized system, which is also available for use on a personal computer. All customers receive the same signals within any give algorithm package. All advice is impersonal and not tailored to any specific individual's unique situation. Quant Savvy and its principles, are not required to register with the NFA as a CTA and are publicly claiming this exemption. Quant Savvy is not governed by any regulatory agencies. Information posted online or distributed through email has NOT been reviewed by any government agencies — this includes but is not limited to back-tested reports, statements and any other marketing materials. Carefully consider this prior to purchasing our algorithms. For more information on the exemption we are claiming, please visit the NFA website: http://www.nfa.futures.org/nfa-registration/cta/index.html. If you are in need of professional advice unique to your situation, please consult with a licensed broker/CTA.

 

CFTC Rule 4.14(a)(9), which exempts Quant Savvy from registration from CTA or NFA registration - Quant SAvvy does not engage in any of these activities making it exempt: (1) Directing client accounts; or (2) Providing commodity trading advice based on, or tailored to, the commodity interest or cash market positions or other circumstances or characteristics of clients.

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