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:
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
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