Dollar neutral equity long/short strategies in daily and weekly timeframes have behaved satisfactorily so far despite tail events in the stock market.
The dollar neutral long/short strategies trade the top three and bottom three Dow-30 stocks in daily and weekly timeframe with equal allocation. The stock selection is accomplished via a ranking function based on features engineered by DLPAL LS software. Click here for more information and related articles.
In daily timeframe there is a two-day minimum holding period to reduce turnover. Below are year-to-date results based on backtest.
The strategy is gaining 2.53% versus -8.6% for S&P 500. Maximum drawdown is 1.7%. Win rate is 53% on a sample of 108 trades,.
In weekly timeframe there is no minimum holding period since turnover is lower. The signals of this strategy are available in our weekly Market Signals reports. Below are year-to-date results based on backtest.
The strategy is up about 5.8% year-to-date versus -8.6% for S&P 500. Maximum drawdown is about 1%. Win rate is 54% on a sample of 37 trades.
Note that the backtests include commission of $0.005 per share.
We are satisfied with this performance amid six-sigma negative events in the market but we are also trying to improve it by implementing functions for smoothing features. So far the results are promising on top of above results.
A different way of developing trading strategies
DLPAL LS offers a different way of developing trading strategies that does not rely on traditional indicators. This software is used by fund managers around the world to develop long-short but also directional strategies in a variety of markets.
If you have any questions or comments, happy to connect on Twitter: @mikeharrisNY