Sunday, July 31, 2011

US portfolio recommendation (from 1, August 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: US_weights_20110801.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
The current long-only portfolio composition is very similar to that of previous quarter: three more stocks (out of 22) have been added and other has been sold. The turnover is 16% (due to the portfolio growth and the trading of these three companies). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 21%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 9.2% (versus 13.3% of the S&P 500). The volatility of the 130:30 strategy is even better: 8.3%.

The weekly 95%-VaR of the long-only portfolio was 1.8% (versus 2.3% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.7%.

The last year annualized Sharpe ratio of the long-only strategy was 2.2 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 2.1. Finally, the SR of the S&P 500 was 1.2 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.
Both low-volatility portfolios attain better returns than those of the S&P 500.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (96% and 84% of the time, respectively). Moreover, the volatility of both low-vol portfolios was always less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Spain portfolio recommendation (from 1, August 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: Spain_weights_20110801.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
For the current long-only low-volatility portfolio, there is no difference respect to the previous quarter composition. The turnover is 20% (due to the portfolio growth). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 35%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 16.7% (versus 23% of the IBEX35). The volatility of the 130:30 strategy is even better: 15.8%.

The weekly 95%-VaR of the long-only portfolio was 3.4% (versus 4.5% of the IBEX35). The corresponding VaR for the 130:30 portfolio was 3.1%.

The last year annualized Sharpe ratio of the long-only strategy was 0.34 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 0.58. Finally, the SR of the IBEX35 was -0.22 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.
Both low-volatility portfolios attain better returns than those of the IBEX35.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the IBEX35 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the IBEX35, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained always a higher return than that of the IBEX35. Moreover, the volatility of both low-vol portfolios was always less than that of the IBEX35.  

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Sunday, July 17, 2011

US portfolio recommendation (from 18, July 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: US_weights_20110718.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
The current long-only portfolio composition is very similar to that of previous quarter: one more stock (out of 22) has been added and other has been sold. The turnover is 17% (due to the portfolio growth and the trading of these two companies). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 24%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 9.0% (versus 13.0% of the S&P 500). The volatility of the 130:30 strategy is even better: 7.8%.

The weekly 95%-VaR of the long-only portfolio was 1.6% (versus 2.2% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.2%.

The last year annualized Sharpe ratio of the long-only strategy was 2.7(after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 2.8. Finally, the SR of the S&P 500 was 1.6 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.
Both low-volatility portfolios attain better returns than those of the S&P 500.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (96% and 83% of the time, respectively). Moreover, the volatility of both low-vol portfolios was always less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Spain portfolio recommendation (from 18, July 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: Spain_weights_20110718.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
For the current long-only low-volatility portfolio, there is no difference respect to the previous quarter composition. The turnover is 15% (due to the portfolio growth). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 25%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 16% (versus 22% of the IBEX35). The volatility of the 130:30 strategy is even better: 15%.

The weekly 95%-VaR of the long-only portfolio was 3.4% (versus 4.4% of the IBEX35). The corresponding VaR for the 130:30 portfolio was 3.1%.

The last year annualized Sharpe ratio of the long-only strategy was 0.43 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 0.60. Finally, the SR of the IBEX35 was -0.19 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.
Both low-volatility portfolios attain better returns than those of the IBEX35.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the IBEX35 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the IBEX35, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained always a higher return than that of the IBEX35. Moreover, the volatility of both low-vol portfolios was always less than that of the IBEX35.  

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Monday, July 4, 2011

US portfolio recommendation (from 4, July 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: US_weights_20110704.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
The current long-only portfolio composition is very similar to that of previous quarter: one more stock (out of 22) has been added. The turnover is 16% (due to the portfolio growth and the purchase of the one company). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 24%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 9.4% (versus 14.7% of the S&P 500). The volatility of the 130:30 strategy is even better: 7.9%.

The weekly 95%-VaR of the long-only portfolio was 1.6% (versus 2.3% of the S&P 500). The corresponding VaR for the 130:30 portfolio was 1.2%.

The last year annualized Sharpe ratio of the long-only strategy was 3.0 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 3.1. Finally, the SR of the S&P 500 was 1.5 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.

Both low-volatility portfolios attain better returns than those of the S&P 500.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the S&P 500 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the S&P 500, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained a higher return than that of the S&P 500 (100% and 83% of the time, respectively). Moreover, the volatility of both low-vol portfolios was always less than that of the S&P 500.

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.

Spain portfolio recommendation (from 4, July 2011)

The portfolio recommendation is based on two low-volatility strategies: a long-only minimum-variance portfolio and a “130:30” minimum-variance portfolio, which is long 130% and short 30%.
For more details about the implementation of these strategies, please read the following post: Some efficient low-volatility portfolios: the minimum-variance policy.
The long-only and the 130:30 low-volatility portfolios recommended for this week, with their corresponding weights, can be found in this file: Spain_weights_20110704.csv

Although I recommend a portfolio composition every week, it is desirable to maintain this composition for several weeks (for instance a quarter year), and then rebalance with the new composition.
For the current long-only low-volatility portfolio, there is no difference respect to the previous quarter composition. The turnover is 5% (due to the portfolio growth). On the other hand, the turnover of the current 130:30 portfolio is a bit larger: 18%.
Regarding the performance, over the last year (52 weeks), the long-only strategy attained a volatility of 14% (versus 23% of the IBEX35). The volatility of the 130:30 strategy is even better: 13%.

The weekly 95%-VaR of the long-only portfolio was 2.6% (versus 3.5% of the IBEX35). The corresponding VaR for the 130:30 portfolio was 2. 3%.

The last year annualized Sharpe ratio of the long-only strategy was 1.27 (after proportional transaction costs of 40 bps were discounted). On the other hand, the SR of the 130:30 strategy was 1.58. Finally, the SR of the IBEX35 was 0.52 over the same period.

In the next figure, you can see the compounded return over the last 52 weeks of the three considered portfolios.
Both low-volatility portfolios attain better returns than those of the IBEX35.

But let add information about the risk. The next graph shows the risk-return space for the three considered portfolios.
The red point represents the mean return and volatility of the long-only portfolio over the past 52 weeks. On the other hand, the green point represents the 130:30 portfolio, and finally the blue point represents the IBEX35 index over the same 52 past weeks.

We can see the two low-volatility portfolios have better mean returns than that of the IBEX35, and also their volatilities are better. In this case, we say the low-vol portfolios dominate the index.

I have computed the same risk-return space for every week over the last year, using the same 52-weeks historical method to estimate the mean returns and the volatilities. The long-only and 130:30 portfolios attained always a higher return than that of the IBEX35. Moreover, the volatility of both low-vol portfolios was always less than that of the IBEX35.  

As a summary, the low-volatility strategies dominate the market index most of the time, showing they attain consistently better risk-adjusted returns.