[idea] 10 Ideas for the Weekend #idea #101TradingIdeas

10 Ideas for the Weekend

From Brain Pickings: A generation later, with an eye to what made Goethe a genius, Humphrey Trevelyan argued that great artists must have the courage to despair, that they “must be shaken by the naked truths that will not be comforted. This divine discontent, this disequilibrium, this state of inner tension is the source of artistic energy.” 

What if computers are changing the vig and not the alpha?

Envelopes: stacked strategies by timeframe for a single market. The idea is to have the faster strategies eliminate the vig for the slower strategies in a ladder-like fashion

Eliminating the vig creates a frictionless surface

What if the reason hedge funds are failing/changing is that they no longer allow themselves to take risk, i.e., if all models are scaled to a maxDD of 2% and 2/20 are subtracted it probably leaves the ‘good’ strategies returning about 4%…

If pension funds and institutions are relying on funds for 8% returns, that leaves a deficit of 4% nationally. The next generation of trading organizations will fill that gap…

What if historical patterns are (largely) irrelevant?

Quants inside the box are just playing tic tac toe against each other

And a guess: correlations are going to rise as more firms move to quant strategies and write once trade many strategies prevail. Intermarket correlations are higher in that type of model than in models where each component is a separate strategy.

If correlation == substitution, shouldn’t factors w/ high correlations to ‘lots of things’ be incredibly valuable because they let the model ‘see’ more?

—h

You might like my book because there are 17 fully disclosed trading strategies in it…

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