Found Alpha Value - Next Steps?

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Found Alpha Value - Next Steps?

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Seeking Help Alphalens

Hi! I'm relatively new to the platform, and I've been playing around with alphalens. I finally found an alpha signal that I'd like to pursue, and based on the graphs, my cumulative long/short return for a 1D period looks promising.

Does this mean that I should just rebalance every day? I tried doing that and received worse results than the graph.

Basically my question is, how does alphalens compute the 1D returns? I'm basically just trying to mimic these returns that I see on the graph in my backtest.

Thanks!

3 responses

I looked in the alphalens source code and it seems to target weights based on relative factor value. Can anyone confirm this?

Joakim Arvidsson (Cream Mongoose)

Does this mean that I should just rebalance every day?

Possibly. I would also look at some of the other statistics from AL, like mean IC for 1D, 5D, etc.

I tried doing that and received worse results than the graph.

In the backtester you mean? If so, then the signal may not be strong enough to survive trading costs (slippage mostly). Maybe also have a look at the Alphalens Tutorial.

I looked in the alphalens source code and it seems to target weights
based on relative factor value. Can anyone confirm this?

That's my understanding as well.

Hi Joakim, thanks for responding!

I've been using the maximize alpha function this entire time, but I think I'm going to try to mimic alphalens by using target weights based on the strength of each factor. I'll see if that gives me any more promising results. If not, maybe I'll try to find a better alpha value.

I'll probably update the thread once I get target weights fully functional.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.