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Applying Creative Diversification to one's benefit
Posted: Fri Apr 25, 2003 5:19 pm
by Sir G
How many things can we break apart and put back together again, but in a different way that might help one improve his Trading?
Did everyone see "My Big Fat Greek Wedding?" Do you recall the bride’s father would say that "Every word comes from the Greek Language." Then he would ask for an English word and he would come up with some kind of connection with a Greek Word.
Let's list everything we can think of and see if we can then come up with a way to apply diversification to it.
Sir G
Timing and sizing of account additions/withdrawls?
Posted: Fri Apr 25, 2003 5:33 pm
by forex_kid
As a newbie in the world of mechanical trading
I'm really intrigued by the potential of applying some sort of logic to the timing/sizing of additions of more cash to my trading account from my savings that I keep in reserve.
Is this the type of construct that you mean? Could you trade multiple sub-accounts accross multiple markets, and appy some sort of logic to the diversifying of the timing of when and how to trade the equity curve of each sub-account?
-Cheers,
Morgan
Diversification through non-correlation.
Posted: Mon May 05, 2003 5:14 am
by AFJ Garner
I am not sure that I am posting this note on the most appropriate thread but here goes.
On page 93 of Robert Pardo’s excellent book Design, Testing, and Optimisation of Trading Systems he has the following advice to give on correlation and choice of a basket to test and trade:
“Selecting the Basket
If the correlation coefficient is +1, they (the futures contracts) are perfectly correlated and should be rejected. If the coefficient is negative, they are inversely correlated and should be included.â€
Posted: Mon May 05, 2003 4:01 pm
by Ted Annemann
Speaking of CSI, they give away a bunch of correlation numbers for free on this web page
http://www.csidata.com/uawebcharts/Mark ... esCorr.htm
As you would expect, T-Bill futures and FedFunds futures have an amazingly high, positive correlation coefficient: +0.9909. If you're long TB and short FF, you're almost perfectly hedged. On the other hand, US Dollar Index and Australian Dollar have a large negative correlation coefficient: -0.887. In this case, if you're long DX and also long AD, then you're very well hedged.