Strategy
This strategy has a bit more complexity than my other posts. It is essentially taking advantage of the VIX Futures’ Term Structure. I won’t go into too much detail, but this article does a great job of explaining the nuances. A brief summary is that since VIX Futures are usually in contango, VXX managers must buy high and sell low leading to a decay in the product value. To capitalize on this, a proxy for the contango is to use the actual VIX index along with the VXV index. We then take the ratio of the two (VIX/VXV) and determine whether it is less than 0.95 (this was an optimized figure, but as with all optimized portfolio strategies, there is a risk of over-fitting). If the ratio is below the threshold, we are generally certain that the VIX Futures’ Term Structure is in heavy contango and will short VXX; otherwise, we move to cash.
Backtest Summary| Performance Measure | Value |
|---|
| Annual Return | 0.47 | | Annual Volatility | 0.37 | | Sharp Ratio | 1.22 | | Max Drawdown | -0.43 | | Alpha | 0.29 | | Beta | 1.17 | /* Here you can add custom CSS for the current table */ /* Lean more about CSS: https://en.wikipedia.org/wiki/Cascading_Style_Sheets */ /* To prevent the use of styles to other tables use "#supsystic-table-1" as a base selector for example: #supsystic-table-1 { ... } #supsystic-table-1 tbody { ... } #supsystic-table-1 tbody tr { ... } */ |
Worst Drawdown Periods| Rank | Drawdown in % | Peak Date | Valley Date | Recovery Date | Duration |
|---|
| 1 | -0.3858 | 11-01-2015 | 02-07-2016 | 2016-07-13 | 183 | | 2 | -0.2728 | 02-18-2013 | 06-19-2013 | 2013-08-02 | 119 | | 3 | -0.2583 | 12-04-2014 | 01-29-2015 | 2015-04-09 | 90 | | 4 | -0.2078 | 09-17-2014 | 10-21-2014 | 2014-11-26 | 50 | | 5 | -0.1297 | 08-09-2015 | 08-20-2015 | 2015-10-08 | 44 | /* Here you can add custom CSS for the current table */ /* Lean more about CSS: https://en.wikipedia.org/wiki/Cascading_Style_Sheets */ /* To prevent the use of styles to other tables use "#supsystic-table-1" as a base selector for example: #supsystic-table-1 { ... } #supsystic-table-1 tbody { ... } #supsystic-table-1 tbody tr { ... } */ |
Stress Events| Stress Events | Mean | Min | Max |
|---|
| US downgrade/European Debt Crisis | 0 | 0 | 0 |
| Fukushima | 0.005 | -0.015 | 0.039 |
| EZB IR Event | 0.001 | -0.023 | 0.03 |
| 2009Q1 | 0 | 0 | 0 |
| 2009Q2 | -0.002 | -0.06 | 0.026 |
| Flash Crash | -0.064 | -0.106 | 0 |
| April 2014 | -0.001 | -0.057 | 0.031 |
| October 2014 | 0.002 | -0.077 | 0.063 |
| Fall 2015 | -0.004 | -0.066 | 0.011 |
| GFC Crash | 0 | 0 | 0 |
| Recovery | 0.002 | -0.183 | 0.155 |
| New Normal | 0.002 | -0.173 | 0.082 |
/* Here you can add custom CSS for the current table */ /* Lean more about CSS: https://en.wikipedia.org/wiki/Cascading_Style_Sheets */ /* To prevent the use of styles to other tables use "#supsystic-table-1" as a base selector for example: #supsystic-table-1 { ... } #supsystic-table-1 tbody { ... } #supsystic-table-1 tbody tr { ... } */
