Back to Community
Long Price Action Algo

I couldn't successfully hedge this one and it doesn't pass beta so I figured I'd share in case someone can improve on it.

Stocks were randomly chosen

Clone Algorithm
30
Loading...
Backtest from to with initial capital
Total Returns
--
Alpha
--
Beta
--
Sharpe
--
Sortino
--
Max Drawdown
--
Benchmark Returns
--
Volatility
--
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: 55f6e75c3107830e0b3f57c0
There was a runtime error.
2 responses

Chris, I thought it would be interesting to take your algorithm and run it through the tearsheet to analyze the behavior. This is powered by Pyfolio, our open-sourced library to evaluate an algorithm.

If you want to use it in your algorithm then take the backtest ID (it's available at the top of your source code in this post) or from the URL:
https://www.quantopian.com/algorithms/algorithm_id/backtest_id

A few things that caught my eye:

  • You're right that the hedge isn't quite balanced. Take a look at this exposure chart:

  • And this causes a high beta-to-spy, reaching a value around 2.5 in the backtest

  • In 2012, the algo had a 37% drawdown. Ouch!

If you keep iterating on the algo, I'd suggest to try running your strategy through the tearsheet to monitor the behavior. If you're not familiar with it, here's a tutorial: https://www.quantopian.com/research/notebooks/Tutorials%20and%20Documentation/Tutorial%20-%20Analyzing%20Backtest%20Results.ipynb

Good luck!

Alisa

Loading notebook preview...
Notebook previews are currently unavailable.
Disclaimer

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.

thanks Alisa, this gives some helpful insight. I like how Pyfolio can identify the top performers.

I created a short version of this strategy however it only performed well on the inverse ETFs but tanks otherwise. I'll keep hacking away.