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Market Neutrality

Hi Everyone,

I've been working on ways to decrease my drawdown and beta. I'm familiar with the concept of market and beta neutrality but am unsure of how to implement this in my code. Any help would be greatly appreciated.

Thanks in advance,

Rohit

Clone Algorithm
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Backtest from to with initial capital
Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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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: 58ba146e38763161da3ea16e
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1 response

Rohit,

Approximate market neutrality can be baked-in by design (e.g. large, diverse portfolio, equal weights long & short), and/or you can patch things up in some fashion at the end (e.g. by applying a constraint to an optimizer/risk management routine, or by adding a hedging instrument such as SPY in the right proportion).

First, I'd make sure that your gross leverage is ~ 1.0. Your beta is very high, so I'm wondering what might be going on.