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
  1. Purpose of scenario 1:
    • Intro to python simulation
  1. Scenario 2:
    • Long only equities
    • Holding period = long term capital gains
    • Low correlation to equity strategies
    • Downside protection
  1. 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
  1. 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
  1. Scenario 4:
    • Go long Apple if price closes over its 100 day moving average. If not, be in cash.
  1. Purpose of scenario 4:
    • Simple backtest to show results and output in Zipline
  1. 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.
  1. 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%
  1. 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
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