Yesterday was a good day for automated equity programs that execute trades at the open of the day since the S&P 500 ended flat after opening down about 1%. Below are the performance results of two long/short equity strategies that use the same features but engineered with different clustering methods.
This long/short market strategy is based on features engineered by DLPAL LS software. The score for ranking stocks is Pdelta*Significance > 50 for long and Pdelta*Significance < -50 for short. This is not market neutral as we allow the directional bias to play in and determine the long/short imbalance.
Recently we also implemented new clustering methods for engineering the features and in particular the Pdelta and Significance features used in the ranking score. Below are the results for yesterday from the two clusters that according to our analysis have the most potential: the original Normal cluster and the new Conservative cluster.
Note that results for yesterday are based on the output of DLPAL LS for all DOW 30 stocks as of the close of the day before.
The return from open to close of yesterday was +0.11% for the 14 long and 4 short stocks.
The return from open to close of yesterday was +0.36% for the 17 long and 4 short stocks.
The conservative cluster performance is much higher and allows a larger net return after transaction cost and slippage. Note that the short part was the same in both cases, only the long part differed.
If you have any questions or comments, happy to connect on Twitter: @mikeharrisNY
Charting and backtesting program: Amibroker
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