Stock and bond model
A. Christian Silva
5/1/2024
Machine learning bond and stock model (MLBS)
Strategy
Strategy uses pattern recognition and machine learning to identify trend and mean-reversion periods.
Strategy is long/short and it can have holding period of few minutes.
Capacity depends on implantation but should be between $20M and $50M.
IMPORTANT! Strategy is under active development: performance as well as other stats will change.
Performance (simulation)
- Trading 10-Year T-Note futures and S&P 500 futures.
- Long/Short.
- TC = 5 bps per day. TC is highly depended on AUM and exact model.
- Interest rates are taken to be zero: cash positions do not accrue interest.
- Volatility level of approximately 21% per year.
- Performance of a long S&P 500 futures (SPX) position with a volatility target of 21% is also shown for comparison.
- Performance of a long 10-Year T-Note (BOND) position with a volatility target of 21% is also shown for comparison.
| Statistics (2001-2025) | |||
| MLBS | SPX | BOND | |
|---|---|---|---|
| Annualized return(%) | 36.70 | 14.10 | 11.30 |
| Annualized volatility(%) | 21.00 | 21.00 | 20.50 |
| Annual Sharpe (Rf=0) | 1.75 | 0.67 | 0.55 |
| Max drawdown(%) | 24.00 | 42.00 | 59.00 |
| Day VaR 99% (%) | -2.90 | -3.60 | -2.90 |
| Day corr w/SPX(%) | -9.00 | NA | -26.00 |
| MLBS | |||||||||||||
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Year | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 8.1% | −4.1% | 6.0% | 7.1% | 2.4% | 5.9% | 7.5% | −6.7% | 5.1% | 4.5% | 5.2% | 4.6% | 54.8% |
| 2021 | 0.5% | 4.5% | −1.3% | −0.1% | 5.0% | −3.0% | −6.3% | 4.8% | −4.9% | 4.4% | 1.5% | 2.0% | 6.4% |
| 2022 | 0.4% | 0.8% | 0.6% | 8.1% | 3.0% | 3.7% | 3.0% | 4.8% | 1.2% | 7.4% | −0.7% | 2.9% | 41.0% |
| 2023 | −0.4% | 4.0% | 1.9% | 8.5% | 2.2% | 0.8% | −3.4% | 4.2% | −1.5% | 2.4% | −2.9% | 1.9% | 18.4% |
| 2024 | 3.7% | 1.7% | 4.5% | 0.5% | −2.5% | NA | NA | NA | NA | NA | NA | NA | 7.9% |
| Simulated returns that include transaction costs but do not include management fees and/or performance fees. The simulation also does not include interast rate on cash reserves. | |||||||||||||
Disclaimers
It is important to note that simulations are not real returns and therefore can only serve as an approximate view of the risk/return profile of a given strategy. Finally, it is fundamental to stress that past performance is not indicative of future results, and any historical returns presented should not be taken as a guarantee of future performance. Investors should carefully consider their financial objectives, risk tolerance, and investment horizon before investing.