Logics & Software

When it comes to creating dynamics portfolios, we always pay attention to diversification. Our philosophy is based on a real diversification between tools and market principles. One of our recent searches shows a strong correlation between volatility and correlation, something that cannot be neglected. For this reason, logics, principles, neutrality and differentiation are essential, especially in critical and delicate market conditions. Diversification must be smart, not only theoretical.

The final step in research, and consequently in portfolios, occurred when we designed and implemented a software able to automatically manage systems in our portfolios. According to pre-set specific algorithmic rules, the software can choose the most suitable systems for the current market conditions.

When structuring a system, we take great care. We try to optimize parameters as less as we can, at the same time 'putting them under stress' in order to make them more efficient. Generally, every system with pre-set values is subject to an optimization on a smaller period, called In-Sample. That is particularly true for strategic softwares built around algorithms. The resulting parameters are applied for a timeframe unknown to the system, called Out-Of-Sample. Another way to give the study a value comes from applying identified parameters between IS and OOS to all the basket we want to work with. Every simple or complex strategy is processed through an observation and validation time of at least two months on paper accounts, before being implemented in the portfolio. This helps the show-up of operative problems or sub-cases, should they be present.

Our years of experience in the investment field led us to better develop the risk-related component. Although not waiving a extraordinary performances, our strategies were conceived to favor linearity. This is why the hedging component is always present in our portfolios, in different and various forms. As a natural cover-up for co-integrated couples, hedging through contrarian tools in the pure stock marketing and through the implementation of closed structures in the options regarding commodities. The added value between strategies is reached when, summing them all, we get improved portfolio performance metrics. A higher r-squared is, for instance, a symptom of linearity and smoothing; that means strategies are well decorrelated, creating an added value.

We currently have a good portfolio of decorrelated strategies with good performances and low draw-downs in every market conditions. Neutral market portfolios are a goal we achieved after years of research and that are constantly changing and evolving.

Privacy Policy