Instruments: VXX,XIV

First lets generate the daily returns of our set of SMAs: (3, 5, 8, 13, 21, 34, 55, 89, 144, 233)

stats for each SMA over Period 2012/2015:

2012 - 2015
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.5674 0.3044 0.4041 0.5795 0.6646 0.6660 0.7320 0.7477 0.7650 0.6292
Annualized Std Dev 0.4134 0.4228 0.4168 0.4261 0.4292 0.4300 0.4325 0.4286 0.4364 0.4616
Annualized Sharpe (Rf=0%) 1.3725 0.7199 0.9696 1.3601 1.5483 1.5488 1.6926 1.7446 1.7530 1.3632


stats for each overlapping 3-year period:

2009 - 2011
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.5683 0.3327 0.4336 0.5186 0.6688 0.7677 1.0785 1.2231 1.4775 1.3867
Annualized Std Dev 0.4458 0.4722 0.4519 0.4624 0.4815 0.4819 0.4848 0.4773 0.4659 0.4976
Annualized Sharpe (Rf=0%) 1.2749 0.7046 0.9596 1.1215 1.3890 1.5932 2.2246 2.5627 3.1712 2.7866
2010 - 2012
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.5202 0.1476 0.2863 0.4513 0.8075 0.9084 1.2864 1.2139 1.3550 1.3435
Annualized Std Dev 0.4591 0.4702 0.4538 0.4723 0.4931 0.4922 0.5130 0.5123 0.5041 0.5260
Annualized Sharpe (Rf=0%) 1.1330 0.3138 0.6310 0.9556 1.6376 1.8454 2.5075 2.3696 2.6880 2.5542
2011 - 2013
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.2284 0.0335 0.3011 0.4324 0.5963 0.5319 0.9002 0.6637 0.6806 0.6186
Annualized Std Dev 0.4248 0.4454 0.4205 0.4321 0.4563 0.4593 0.4806 0.4729 0.4545 0.4656
Annualized Sharpe (Rf=0%) 0.5377 0.0752 0.7159 1.0007 1.3069 1.1581 1.8733 1.4036 1.4973 1.3287
2012 - 2014
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.4257 0.2039 0.2758 0.4496 0.6420 0.4901 0.5568 0.4025 0.4703 0.3081
Annualized Std Dev 0.3782 0.3662 0.3646 0.3716 0.3573 0.3510 0.3667 0.3688 0.3791 0.4035
Annualized Sharpe (Rf=0%) 1.1257 0.5569 0.7564 1.2100 1.7965 1.3962 1.5184 1.0913 1.2403 0.7636
2013 - 2015
sma3 sma5 sma8 sma13 sma21 sma34 sma55 sma89 sma144 sma233
Annualized Return 0.7080 0.4681 0.6157 0.8414 0.7275 0.5574 0.3370 0.2673 0.1662 0.0657
Annualized Std Dev 0.3756 0.3781 0.3802 0.3804 0.3621 0.3664 0.3571 0.3487 0.3589 0.3612
Annualized Sharpe (Rf=0%) 1.8851 1.2381 1.6193 2.2120 2.0093 1.5213 0.9439 0.7664 0.4630 0.1817


The SMA lengths are grouped into

At each end of the year, beginning 2011-12-31, the best 2 SMAs (using a 3-year lookback period), which shall not belong to the same sub-group are selected and traded for 1 year.

Applying this rule we trade the following SMA pairs for the years


2012 - 2015
  combi
Annualized Return 0.544
Annualized Std Dev 0.3735
Annualized Sharpe (Rf=0%) 1.456

Let’s compare the Combi to the single SMAs: