Master Sector Rotation Strategy 🔄: SPDR vs. Vanguard ETFs 🚀

Рет қаралды 4,524

10 ай бұрын

Dive into the world of sector rotation trading with Ali Casey! Discover the key differences between SPDR and Vanguard sector ETFs, and watch as we craft a volatility-driven twist on this powerful strategy. 📈💼 Get ready to supercharge your trading portfolio! 💪 #SectorRotation #TradingStrategy
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Пікірлер: 22

@mehdikhosh8879 Ай бұрын

Very useful information, Thank you so much.

@StatOasis Ай бұрын

Thank you for being here

@Gos2 10 ай бұрын

Very interesting, thank you!

@StatOasis 10 ай бұрын

My pleasure!

@eliechidiac9427 2 ай бұрын

Why the top five? I’ve been doing the top 2 sectors. Same 3 month graph, replace monthly. Except unlike your 6-month moving average, I stay 50% or 100% cash if the top 2 sectors had a negative yield in the preceding 3 months. Has anybody looked at historical results for top 2 versus top 5 ?

@StatOasis 2 ай бұрын

there are literally hundreds of variations, nothing is perfect, is all about what you are looking for from the behaviour of the strategy in certain market regime and its equity profile.

@iameladlevi 10 ай бұрын

Very nice! Thanks! How do we pick base on volatility? Is the most volatile in / out?

@StatOasis 10 ай бұрын

You pick the least volatile in the past period

@iameladlevi 10 ай бұрын

@@StatOasis Sounds good. But there is some filler that filters out base on volatility, I mean , there are cases in the showcase where you had only 1 or 2 selected.

@StatOasis 10 ай бұрын

there is a threshold were volatility is high that they don't even get an allocation. unfortunately the site doesn't clarify that threshold and it can't be changed. still you can use other measures like ATR or STDev if you are building the system on python. P.S. volatility above 40 is very high on any instrument that has stocks components inside.

@iameladlevi 10 ай бұрын

@@StatOasiswhat value of “Volatility period” did you chose in the demo movie? Great returns!

@dr.michaelj.stefano8113 Ай бұрын

he didnt explain that at all

@lmpaske 10 ай бұрын

So how do we avoid curve fitting these types of portfolios? One could cherry pick instruments, durations, different models etc. to get almost any result. There doesn’t seem to be a way to really test any given combo besides a single run all IS backtest.

@StatOasis 10 ай бұрын

Like I mention in the video if you go to SSRN there literally hundreds of peer reviewed white papers on the subject. all these are long term trend following flavors which is proven to have been working since 1200 as per AQR research paper, using indexes instead of single instruments. Garry Antonacci has a whole book on the subject with a website and data going back to 1900, plus many others followed suit with their flavors.

@lmpaske 10 ай бұрын

Agreed there appears to be an edge, but also a lot more risk then meets the eye. If you take the exact same model from the video but increase the momentum period by just 1 month (to 4 months instead of 3), the CAGR drops well below the SPY (7.58% vs 9.63% for SPY). Allocate Smartly recently did a blog post about how many of the TAA strategies they track did poorly during the pandemic drop and did nothing to reduce the drawdown, in large part because these particular strategies did not pick the right portfolio assets (to deal with inflation). All of this seems to illustrate that to get the edge offered by this strategy you have to be somewhat lucky to select outperforming lookback periods, assets, momentum models, etc. The really big problem with this is the duration - it will take many years and market regimes to know if you picked well or not, and that could amount to a huge opportunity cost (for example, from 2010 to now SPY way outperformed with a slight larger drawdown). While buying the SPY isn't perfect and depending on the model you use and the variables you select it has larger drawdowns at least you know what you are getting. I'm with Buffet and Charlie on this one: 90% SPY, with 10% SHY (for cash to buy the big dips and liquid withdrawals). @@StatOasis

@StatOasis 10 ай бұрын

You are right that there is luck in the universe you pick, but that applies everywhere. the only way to beat it is with a portfolio, where each strategy is trading a different instrument or universe. that is why I have different portfolios in the VIP+ section , not because some have better performance, but because they use different universes and different momentum calculations, so if you trade 3 portfolios instead of one you smooth out those periods. Please keep in mind that the last bull market in the S&P500 was the longest bull market in history. SP500 had +14 years with 0% performance and +50% drawdown three times in the last 100 years. so while it is true that over +40 years holding SPY & SHY might pay off, but they are no match for any momentum system. even C > SMA200 beats that.

@lmpaske 10 ай бұрын

@@StatOasis I think to some degree it depends on how one defines beats. SPY advocates will point to the last 14 years. TAA advocates will point to the 2000s. Both are right, really, just at different times. As you say, it comes down to trading a portfolio. Have your cake and eat it too.

@StatOasis 10 ай бұрын

thank you for the follow up, I love these conversations 🙂 here is something that I have been through. I had money in the index in 1999, it took 15 years to get back to break even, so even with this amazing latest bull run am still behind on that account (CAGR 4.5%). not to mention I had to sit through +55% drawdown twice. Now adays even my kids funds are in TAA. TAA provide: - better returns - higher absolute returns - better risk adjusted return- much lower drawdown - better rolling returns - TAA is positive in any 5 years period regardless of when you start. - easy implementation with monthly signals. I think in any measure TAA beats the index or fixed portfolios, but I get it, having a fixed pie like Buffet portfolio is easier to implement specially if you are just starting out, which by the way that is why I have "Dalio & Buffet" fixed portfolio in the VIP+ section, which combines the two in different weights.

@--JohnDoe 13 күн бұрын

But with this strategy, you will pay short term capital gains taxes. For me that's 17% more taxes. Ouch.

@StatOasis 13 күн бұрын

But you pay taxes on any trading/investing returns

@MisterPDR 10 ай бұрын

there it is - finally! 🎉 Great video, but what is the volatility optimization about? Choosing the ones with the lowest? Didn’t fully understand how the allocation worked in this respect 🫡

@StatOasis 10 ай бұрын

You sort all sectors on volatility then you allocate on that. Play with options and you will get how it works