Strategy based on Mathematic and Correlation

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Hi

i am doing a research on a strategy. however, there are some components are missing.

i would be grateful if anyone here can help.

the strategy is as following:

the system works with arbitrarily selected currencies(EUR, USD, GBP, CHF, JPY, CAD, NZD, AUD, SEK, NOK and DKK)

The trading strategy is based on quantitative analysis

- a statistical concept. - 50% statistical arbitrage statistical and - 50% position size management.

Standard risk parameters employ an average combined leverage around 2.5 - 6:1 for the entire portfolio.

The system opens positions in opposite directions.

The system is USD neutral (i.e. USD bought = USDsold), although there is a long/short exposure in other currencies.

The risk is addressed by diversification and position size management.

The system rebalances portfolio by gradually buying/selling fractional currency lots.

No need for protective stops.

you can download the spreadsheet of 1 month track record from here

I look forward for your help.

 

I caried out weeks of testing, for an associate who created a similar idea.

This particular correlator concentrated on the majors, omitting SEK, NOK and DKK. The key to the success of such a programme is the settings used and it is tempting to curve fit when carrying out a backtest.

One of the flaws in his correlator is that a good/bad day, on one currency, tends to skew all the others. For example, if GBP suffers a sharp drop against all other currencies, that tends to narrow the correlation between the other cross pairs. Whereas, in fact, there may have been a 50-100 pt move on a non-GBP pair.

You may find it useful to PM me, as I have a lot of info that may be helpful to you.

 

Same Idea

simsimtrader:
Hi

i am doing a research on a strategy. however, there are some components are missing.

i would be grateful if anyone here can help.

the strategy is as following:

the system works with arbitrarily selected currencies(EUR, USD, GBP, CHF, JPY, CAD, NZD, AUD, SEK, NOK and DKK)

The trading strategy is based on quantitative analysis

- a statistical concept. - 50% statistical arbitrage statistical and - 50% position size management.

Standard risk parameters employ an average combined leverage around 2.5 - 6:1 for the entire portfolio.

The system opens positions in opposite directions.

The system is USD neutral (i.e. USD bought = USDsold), although there is a long/short exposure in other currencies.

The risk is addressed by diversification and position size management.

The system rebalances portfolio by gradually buying/selling fractional currency lots.

No need for protective stops.

you can download the spreadsheet of 1 month track record from here

I look forward for your help.

Hi,

same idea is here.

you need 3 or more additive instruments,

the GOLD and OIL and DJ for the times that all pairs are miss correlated.

it means : ( the equities are totally in SHORT or LONG position and the COMODITIES and STOCKS are in LONG or SHORT positions "against equities" ) see 2008/08/08 till 2008/10/20 ( huge sell of in EU , GU , GJ , UJ , EJ , AU , NU , GOLD , OIL , DJ + huge buy in UCAD , UCHF ) = sell everything and buy USD.

and then it reversed to sell USD and buy every thing !

thanks

OTR

 

This sounds like statistical arbitrage as used in stock trading, but Forex is made up of currency pairs already (stock arbitrage uses stock pairs) so I'm not sure the same thing makes much sense in Forex.

For instance, if you buy the EURUSD and buy the USDCHF you are dollar neutral, but you're long the EUR against the CHF. Why not just buy the EURCHF? One order means less spread to pay.

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