Please state the pros and cons of portfolio trading. - page 3
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
By the way, "uncorrelated instruments" is almost from the realm of mythology.
I agree in part.
Taking into account the pairwise correlation coefficient between instruments reduces the growth rate of portfolio profitability, but not by much. This is due to weak, as a rule <<1, correlation.
I.e. your charts confirm what I said - the portfolio is slashing and so is the profit margin.
No. Once again.
We are talking in terms of averages, not what might be. That one day, one instrument can give a return higher than a portfolio instrument - undeniable! But so what? On a large sample, a portfolio at the same risks as a single instrument will show a higher return always (the larger the sample, the greater the "always").
That's exactly what I'm arguing.
We are speaking in terms of averages, not what might be. The fact that one day, one instrument may yield higher than a portfolio instrument is indisputable! But so what? On a large sample, a portfolio with the same risks as a single instrument will show higher returns always (the larger the sample, the greater the "always").
That's exactly what I'm saying.
The point of a portfolio is to reduce risk. If the risk is the same, all instruments give the same profit, otherwise there is an arbitrage situation. Or rather, in theory they should in an ideal world. In the real world there are a number of constraints - transaction cost, liquidity - that allow some imbalance to exist.
Your charts show an instrument with risk level X and a portfolio with risk level Y. Obviously X>Y. The return on that red instrument, may be higher than the portfolio. Or it may not be. On the charts we see both of these options, depending on the length of the time series.
timbo, I've stopped understanding you.
Apparently my head is in overdrive.
Tell me, if anyone has been involved in forex portfolio trading, how has the issue of the equity ratios of assets in a portfolio been resolved?
In paired trading on the stock market, this problem is solved through asset beta ratios, which are calculated through a "benchmark" market portfolio - the stock index. And in forex?
Tell me, if anyone has been involved in forex portfolio trading, how has the issue of the equity ratios of assets in a portfolio been resolved?
In paired trading on the stock market, this problem is solved through asset beta ratios, which are calculated through a "benchmark" market portfolio - the stock index. And in forex?
Apparently, we are referring to the distribution of volumes of transactions between the instruments. If so, the easiest way is to normalise them on the basis of volatility, say by standard deviation. If the question is about diversification between trading systems - then it is more complicated, there is no unambiguously correct answer.
This is a market-neutral investment strategy. A beta-neutral market portfolio of currencies is formed. It is a question of choosing the shares of each currency in the portfolio.
In the stock market, everything is solved through a benchmark portfolio.
This is a market-neutral investment strategy. A beta-neutral market portfolio of currencies is formed. It is a question of choosing the shares of each currency in the portfolio.
In the stock market, everything is solved through a benchmark portfolio.
And who prevents you from doing the same in forex? Build your benchmark portfolio of currencies, find ratios on it.
And who prevents you from doing the same in forex? Build your benchmark portfolio of currencies, find ratios on it.
Which currencies to choose for your benchmark portfolio? By what criterion? In the stock market, this criterion is the level of capitalisation of the company........
In the stock market, this criterion is the level of capitalisation of the company........
How does the capitalisation level of a company affect the amount of risk of its instrument? Certainly, there is a direct correlation, but you need to equalise instruments by risk, and it is not necessary to know the capitalisation level of the instrument being traded, which is what the beta coefficient says: it takes the risk of the benchmark portfolio as its denominator. Define the risk of the synthetic index and express the ratios of the instruments in it through it.