The Dow-30 long-short strategy has performed well year-to-date and has acted as a hedge in a falling stock market.
The Dow-30 long-short strategy for Dow-30 stocks operates with weekly features calculated by DLPAL LS software. The strategy is rebalanced weekly at the open and is dollar neutral; three stocks long and three stocks short.
The strategy is up nearly 7% year-to-date, with a maximum drawdown of 5.2%.
The strategy, called DOWW, went into drawdown mode in February but started rebounding by mid-March. The strategy recovered the losses by Mid-April but then entered a consolidation period until mid-July. Afterward, due to accelerated losses in the stock market, the strategy equity made new highs. During August there was another consolidation without a significant drawdown and last week the performance got a good boost from short positions, as shown below, for a gain of 1.2% from the open to the close of the week.
A 7% return from long-short can help to reduce drawdown and limit losses of an ensemble of strategies. The DOWW strategy has a volatility switch, and when it is triggered, the signals may be ignored. The year-to-date return of the strategy with the volatility switch is about 2% (Due to a delayed exit, the reported performance in our weekly signals is +0.1%.) The volatility switch was triggered in mid-February, and the strategy avoided the drawdown this year but that limited the performance going forward. However, even a return of +2% can be a good contribution to an ensemble during negative performance periods.
The DOWW strategy is part of a six-strategy ensemble. The strategies operate in the weekly timeframe. The performance, open positions, and new signals are updated for our subscribers every week during the weekend.
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CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.