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OLMAR Sector Specific

Here is a sector specific version of Grant's OLMAR algo. I really like the implementation, so I thought I would try to break it down by sector. My first pass was on the financial sector using the vanguard etf as a benchmark. The results are bad. Any ideas on what I'm doing wrong?

Thanks for the help.

John

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: 55af0a56cba7dd0c73b5c809
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3 responses

This has been researched by Grant as well. The sector ETFs are highly correlated with market. For OLMAR to be successful, we need a high idiosyncratic component in stocks and some degree of mean reversion. If you search for OLMAR in the community, you will see a lot of research and backtests. Thanks!!

Shiv,

I may be missing your point and I've seen the posts around using ETFs in OLMAR but I'm not trying to build a sector ETF version of OLMAR. Check out the code and the transactions and you can see that its trading financial stocks exclusively.

I'm taking a basket of stocks in a sector and seeing if they beat the ETF as a benchmark. I figure if you can do that on a set of sectors then you can diversify based on the sectors themselves and have a lower beta accordingly. Does that make sense? Do you think that is not possible to out perform a sector using OLMAR like Grant's original version does for the market as a whole?

Thanks,

John

John,

Not sure what's up. You might try running an equal weight allocation, to see how it compares with the optimization routine.

Grant