Regime detection through hidden markov model It’s rumoured that in the early days of Renaissance Technologies - according to the book ‘The Man Who Solved the Market’ - hidden markov models are used for regime detection.
Here I am, a couple of decades later - employing this strategy. This will be integrated into my ‘Jarvis’ - a series of Algorithmic toolkits that advises me in all situations.
Hidden markov mode is a statistical unsupervised learning model used to model states.
Regime detection through hidden markov model It’s rumoured that in the early days of Renaissance Technologies - according to the book ‘The Man Who Solved the Market’ - hidden markov models are used for regime detection.
Here I am, a couple of decades later - employing this strategy. This will be integrated into my ‘Jarvis’ - a series of Algorithmic toolkits that advises me in all situations.
Hidden markov mode is a statistical unsupervised learning model used to model states.
SRS analysis I haven’t paid much attention to SRS contributions as a way to reduce taxable income. But lately, I realised you could boost investment portfolio returns through this avenue at literally 0 cost.
I find this blog post written by a local finance blogger to be really helpful in understanding the SRS contributions and withdrawal mechanics.
For my own understanding, I also did some quick analysis using google sheet (see ‘Analysis in google sheet’ section) to evaluate if this works, and to my surprise, I found that free lunch does exist in Singapore!
Setting up a database for my Jarvis As I run more sophiscated trading strategies, I require a proper database for training parameters and records.
Previously, I was using a mix of SQLite, RDA and CSV files - but going forward I will be using Mysql (workbench) to house my data.
Below is an example of database tables for my market neutral strategies. I will be using these tables for the following,
DAX index and Germany ETF I will keep it short in this post since I espoused on this strategy a couple of times.
I discovered another market neutral opportunity this month.
And this is based on ratio between Germany DAX index and MSCI based Germany ETF (EWG)
Based on backtest, sharpe ratio is close to 1.16.
The composition between these 2 indexes are largely similar and any significant deviation shouldn’t persist for long.
Jarvis Humans are imperfect.
Humans are prone to biases.
Humans are dumb.
Humans have egos.
Humans rely on intuitions which are way way overrated.
And all these are blockers to sustainable positive performances in the area of investment portfolio management.
But not all is lost… I’ve found a way to aid me in my invesment decision making processes.
And that’s Jarvis! My expert advisor to advise me what to do in different scenarios.
UK index and UK ETF I discovered another market neutral opportunity this month.
And this is based on ratio between FTSE 100 index and MSCI based UK ETF (EWU)
Based on backtest, sharpe ratio is close to 0.9.
The composition between these 2 indexes are largely similar and any significant deviation shouldn’t persist for long.
The optimal lookback period for the MA component in bollinger band is approximately 40 days.
Market neutral strategy As the negative news pile up (trade wars, slump in economy growths, etc), I sought for market neutral stategies that could perform well in any market environment.
An idea that struck me recently is to exploit the pair between Berkshire and SnP 500 ETF.
The SnP500 ETF/ Berkshire ratio has been falling over the years - insinuating that Berkshire still outperforms the index in the last couple of years.
What’re the returns (XIRR) for my CPFIS Portfolio? Note: This section is archived because I’ve diverted my CPF OA funds to Endowus (40-60 portfolio) instead. It aligns more with my philosophy of global diversification to seek higher risk adjusted returns. I realized an annualized loss of approximately of -1.5% a year. With opportunity cost of 2.5% from CPF OA, that amounts to 4% loss a year.
I expounded my philosophy and calculated the returns of my CPFIS portfolio via XIRR (Extended Internal Rate of Returns) here.
What’re the returns (XIRR) for my CPFIS Portfolio? Every employee in Singapore is bounded by the same set of CPF rules.
As an ex-economist/ data geek who doesn’t shy away from having skin in the game. I asked myself this question back in 2015 when I was still a starry-eyed young man 2 years into the workforce - how do I set out to optimize my returns in my CPF OA with these given set of constraints,