#5 – FX Carry Trade
#8 – FX Momentum

Authors: Olszweski, Zhou

Title: Strategy diversification: Combining momentum and carry strategies within a foreign exchange portfolio

Link: http://apps.olin.wustl.edu/faculty/zhou/O_Z_JHDF_2014.pdf

Abstract:

Hedge funds, such as managed futures, typically use two different types of trading strategies: technical and macro/fundamental. In this article, we evaluate the impact of combining the two strategies, and focus on, in particular, two common foreign exchange trading strategies: momentum and carry. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. Our analysis, which uses data spanning 20 years, highlights the potential benefits of achieving strategy-level diversification.

Notable quotations from the paper:

…