Scenarios for Testing

1. Scenario 1 – Simple Sim:
   • S&P 500 only
   • Go long when a 50 day moving average crosses above a 100 day moving average
   • Close position when it crosses back down

2. Purpose of scenario 1:
   • Intro to python simulation

3. Scenario 2:
   • Long only equities
   • Holding period = long term capital gains
   • Low correlation to equity strategies
   • Downside protection

4. Purpose of scenario 2:
   • Achieve near zero or negative correlation
   • Scale to 100s of millions
   • Show modest couple of percent per year
   • Improve diversification & enhance overall performance

5. Scenario 3:
   • Stock falls four standard deviations below is 60 day linear regression
   • Expectation is that stock will bounce two standard deviations up
   • Test variations of the above:
     • Change linear regression to 30 or 90 days
     • Change bounce to 3 or 5 standard deviations up

6. Scenario 4:
   • Go long Apple if price closes over its 100 day moving average. If not, be in cash.

7. Purpose of scenario 4:
   • Simple backtest to show results and output in Zipline

8. Scenario 5:
   • Look at stocks the 30 stocks that make up the Dow Jones Industrial Average.
   • Check each stock to see if the price is below or above the it’s 100 day moving average.
   • Give each stock a 1/30 allocation.
     • If all stocks are above it’s 100 day moving avg then the portfolio will have a 100% allocation.

9. Scenario 6:
   • Look at socks the 30 stocks that make up the Dow Jones Industrial Average.
   • Measure the return in the past month for each stock.
   • Sort from best to worst performance.
   • Buy the top 10 and give each an equal wait of 10%

10. Scenario 7 – Momentum:
    • Trade & rebalance monthly
    • Calculate momentum slope using 125 days
      • The shorter the momentum period the more extreme the momentum score will be
        • Short term events are extrapolated on a yearly basis which can result in extreme numbers
    • Select the top 30 stocks in the S&P 500
      • If the stock has a momentum value higher than 40, we buy it. If not then we keep the calculated weight of that stock in cash
        • Even if the stock falls out of the top 30 we will still hold as long has the momentum score stays above 40
      • If the stock falls below the minimum required momentum value or if it leaves the index we sell
    • Weights are calculated according to inverse volatility
    • Volatility is calculated using 20 day standard deviation
    • Trend filter is calculated base on 200 day average of the S&P Index
      • If trend filter is positive, we are allowed to buy
    • Minimum required momentum value is set to 40

Advertisement