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Inquiry for peer review

I am looking to learn more about this field.
Can someone help explain the where this algorithm went wrong and were it did well if at all.

Thank you.

Clone Algorithm
Backtest from to with initial capital
Total Returns
Max Drawdown
Benchmark Returns
Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 599d030f44985854e45a6512
There was a runtime error.
2 responses

First, I'd set leverage to 0.5 long and short, so you don't go over 1.0 (don't spend more money than you have in your account)

I think where the algo goes wrong is it makes a really rigid assumption about the market and market dynamics are always changing. Even if stocks mean revert weekly Monday-to-Monday for a while, that'd be really strange if they always did so consistently. For every simple rule that's easy to exploit you can betcha somebody is already exploiting it and has already arbitraged all the alpha out of it.

Tearsheets are a great way to evaluate an algo.

You've got a good structure on this algorithm. It's holding a constant leverage (which is good), it's carefully avoiding exposure to a single stock, things like that.

Unfortunately, the basic thesis doesn't look like it holds up. Take a look at our lectures, in particular the ones about long-short equity and factor analysis, and see if that sparks some ideas for you to find a different thesis to test.

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