{"id":18181,"date":"2022-10-03T10:49:07","date_gmt":"2022-10-03T08:49:07","guid":{"rendered":"https:\/\/quantpedia.com\/?p=18181"},"modified":"2022-12-01T21:41:29","modified_gmt":"2022-12-01T20:41:29","slug":"multi-strategy-management-for-your-portfolio","status":"publish","type":"post","link":"https:\/\/vvv.quantpedia.com\/es\/multi-strategy-management-for-your-portfolio\/","title":{"rendered":"Multi Strategy Management for Your Portfolio"},"content":{"rendered":"

If you follow Quantpedia\u2019s blogs<\/a>, you probably know that Quantpedia PRO<\/a> already contains multiple risk management and portfolio construction tools<\/a><\/strong> for your quantitative investment strategies. For example, Crisis Hedge<\/a> can find you suitable investment hedges for negative months and for bear markets. The Correlation Analysis report<\/a>, on the other hand, reviews your model portfolio\u2019s correlation structure. Alternatively, Value at Risk<\/a> (VaR report<\/a>) will help you understand what level of risk you can expect from your portfolio during a crisis. The newest Quantpedia PRO tool (available in a few days) will analyze something completely different, though \u2013 how to manage multi-strategy portfolios.<\/p>\n\n\n\n

This report focuses on simple multi-strategy overlays based on trend-following and mean-reversion<\/strong>. In other words, we look into whether it is better to increase weights of the well-performing strategies and decrease those of bad-performing ones or if the opposite strategy is more profitable.<\/p>\n\n\n\n

You can easily apply these multi-strategy overlays to various types of underlying \u2013 ETFs, systematic strategies, multi-asset portfolios, or multi-strategy portfolios. This article again serves as a primer for the new report’s methodology.<\/p>\n\n\n\n

How to manage a Multi Strategy portfolio<\/h2>\n\n\n\n

There are countless debates on the topic of managing multi-strategy portfolios. Quantpedia has already published several articles addressing this problem. Risk Parity Asset Allocation<\/a> examines and explains three methodologies of risk allocation which ensure an equal level of risk among assets in a portfolio. Another article called \u201cThe Active vs Passive: Smart Factors, Market Portfolio or Both?<\/a>\u201d discusses when and whether it is better to invest in the market itself or pick specific factors. Additionally, several Quantpedia PRO tools, such as Volatility Targeting<\/a> or Markowitz Model<\/a>, also look into the problem. The mentioned tools focus mainly on the risk aspect of underlying assets. That\u2019s one of the reasons why we will today mostly focus on return.<\/p>\n\n\n\n

Today, in our Multi-Strategy Management report<\/strong>, we apply multiple trend-following and contrarian strategy overlays with signals based on the performance of the underlying strategies. We analyze various time horizons from short-term (3-months), mid-term (12-moths) to long-term (24-months). Moreover, we apply these overlays to the original unadjusted strategies and also to the volatility-adjusted strategies.<\/p>\n\n\n\n

Why do we look also at volatility adjusted strategies?<\/strong> Volatility adjustment is practical when portfolio contains assets or strategies with very different volatilities. In such a case, it is helpful to equalize the volatility contributions of the underlying strategies. After the volatility adjustment, all of the strategies should have the same chance to appear among the best\/worst performing strategies. If we use the strategies with unadjusted volatility contributions, some strategies might have a higher chance of being at the top\/ bottom, just because of their high volatility and not the actual performance.<\/p>\n\n\n\n

Cross Asset Strategy use case<\/h2>\n\n\n\n

Data<\/h3>\n\n\n\n

We analyzed ten strategies from the Quantpedia screener<\/a>. To create a diversified portfolio, we picked strategies covering various markets: stocks, commodities, currencies, multi-asset<\/strong>.<\/p>\n\n\n\n

Our strategies include:<\/p>\n\n\n\n