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S&P 500 and Long/Short Equity Performance In October 2018

This October has been one of the worst months for equities since 2010 with a larger than two standard deviations monthly loss of 8.8% based on data since 1960. Our  long/short equity strategy has gained 2.2% during this month.

Below is a chart of S&P 500 since 1960 with returns for the month of October only and monthly returns. Click on image to enlarge.

It may be seen that October  statistics suffer from two large negative returns, one due to the 1987 crash of about -22% and the other during the 2008 bear market of about -17%. Despite those two large negative returns, one the average since 1960 October has been a positive month with 0.9% return and win rate of 61% ( up 30 times and down 19 times.)

A -8.8% return this year exceeds the lower two standard deviations band by about 1%. It is interesting to notice that the majority of the monthly losses that have exceeded two standard deviations have occurred during bear markets or severe corrections.

Our weekly rebalanced DOWW equity long/short strategy holds 6 long and 6 short Dow 30 stocks at any given time with equal position size so that it remains dollar neutral. During this October, the strategy has gained 2.2% versus the -8.8% loss of the S&P 500 and it is now flat for the year. Unleveraged monthly returns since 2016 are shown below:

Strategy maximum drawdown stayed low in 2016 and 2017 only to rise to 6.5% this year.

The rank function for selecting long and short securities is based on two features calculated weekly by DLPAL LS software. This software is used by hedge fund managers and professional traders around the world to develop advanced features based on price action anomalies. In turn, the features are used to develop long/short and also directional strategies in daily and weekly timeframes based on fixed algos or machine learning.

The signals of our DOWW strategy are included in our weekly Premium Signals Report.

Hedge funds and professional traders can receive a free fully functional demo of DLPAL LS valid for one month. For details and information on how to order a demo click here.

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