Multi Factor Startegy

Srivathsan Raghav | June 7, 2021

Strategy #1:

Criteria:

Algo Trading Assignment

ALGO TRADING SIMULATOR REPORT

Figure 1.1: Nifty vs Portfolio returns and other risk metrics

Universe Mid Cap
Sector chosen
Automobile + Chemicals + Technology Frequency Monthly
Indicator
Market Cap, Dividend Yield and Growth Rationale:

Mid-Caps have the capacity to become large caps and so has good growth potential. Looking at the change in trends, I decided to choose Automobile, Chemicals and Technology. Having this in mind, I have chosen indicators such as Market Cap, Dividend Yield and Growth. Reason is very simple. Positive Growth and good dividend are healthy for any portfolio. So, I have chosen them and have set frequency as monthly. As predicted, the strategy is giving a whopping 24.13% return with 16.28% risk and has an attractive Sharpe ratio of 1.11. It is said that more the Sharpe ratio, more will be beneficial for the investor. Hence, I believe this new combination [Trio] will work.

P. Srivathsan MGFM 1941

Strategy #2:

Criteria:

Algo Trading Assignment

Figure 1.2: Nifty vs Portfolio returns and other risk metrics

Universe Mid Cap
Sector chosen
Automobile + Chemicals + Technology Frequency Monthly
Indicator
Market Cap + Dividend Yield + Value and Growth Rationale:

Mid-Caps have the capacity to become large caps and so has good growth potential. Looking at the change in trends, I have chosen Automobile, Chemicals and Technology. This time, I have added indicators such as Market Cap, Dividend Yield, Value and Growth. Reason is very simple. Positive Growth and good dividend are healthy for any portfolio. It is important to check if the company is undervalued or fairly valued. So, I have chosen them and have set frequency as monthly. As predicted, the strategy is giving a whopping 25.77% return with 12.6% risk and has an attractive Sharpe ratio of 1.57. It is said that more the Sharpe ratio, more will be beneficial for the investor. Best part is the Max drawdown is 20.45% which is lesser than returns 25.77%. Hence there is a definite probability of profit in this strategy.

P. Srivathsan MGFM 1941

Strategy #3:

Criteria:

Algo Trading Assignment

Figure 1.2: Nifty vs Portfolio returns and other risk metrics

Universe Mid Cap
Sector chosen
Automobile + Chemicals + Technology Frequency Monthly
Indicator
Market Cap + Dividend Yield * Value * Growth Rationale:

This time, I have made Market Cap + Dividend Yield * Value * Growth. I have set frequency as monthly. As a matter of surprise, the strategy is giving a whopping 40.9% return with 15.01% risk and has an attractive Sharpe ratio of 2.32. It is said that more the Sharpe ratio, more will be beneficial for the investor. Best part is the Max drawdown is 16% which is way lesser than returns 40.9%. Hence there is a definite probability of profit in this strategy.

P. Srivathsan MGFM 1941 


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