Erez Katz, Lucena Research CEO and Co-founder
Alternative-Data-Based Long and Short Portfolios and Backtests in action
Lucena’s Model Portfolio
Lucena delivers Model Portfolios algorithmically powered by big data and AI. The concept is as follows:
- 1. Carry forward the very same execution rules of a backtest into the future where decisions are made and published before market opens.
- 2. Simulate as authentically and realistically as possible in order to provide unbiased assessment of how predictive alternative data is in a real-life scenario.
- – Account for slippage and transactions cost.
- – Apply short borrowing cost when applicable.
- – Account for dividends, split, and reverse splits
- – Rich execution guidelines such as OCO (Order Cancel Order), Stop Loss & Target Gain, allocation guidelines.
- 3. Generate a comprehensive performance attribution report on demand for real-time assessment.
Below, I provide a high level synopsis of some of our Model Portfolios.
How Does the Model Portfolio Trade?
A multi-factor model is nothing more than a multi-criteria filter or a scan. In essence, we apply machine learning classification to identify which factors are most selective of constituents with impending price action either bullish or bearish.
The model portfolio scans for securities daily and identifies which are most primed for entry (long or short). Once positions are identified, the model creates and publishes trading orders pre-market based on its allocation restrictions and available cash.
Upon trade execution after market opens and based on live intra-day prices, transactions are created and the positions are then held until either their time elapsed in which they close on MOC (market on close) or an intra-day stop condition is triggered intra-day (stop loss or target gain). Although we don’t consider TCA (transaction cost analysis), this is as close as we get to a real life scenario. In addition, we are fully integrated with Interactive Brokers for a complete true assessment from a live brokerage perspective.
The idea is to provide full transparency by which all trades are determined and published pre-market. Furthermore, all trades are netted of transactions cost, and short borrowing cost.
Lucena Model Portfolio: Analyst Consensus
Analyst Consensus is a long only trading strategy that identifies stocks from the Russell 1000 with bullish analyst recommendations. The strategy further sub-selects investment positions using Lucena’s proprietary technical and fundamental factors.
Backtest
Perpetual Performance
Analyst Consensus has generated healthy returns since its inception on January 2019. The goals of the strategy are to outperform the S&P 500 in both total returns and lower volatility.
Lucena Model Portfolio: BlackDog
BlackDog is a conservative, long only strategy that follows a risk parity (RP) approach. The strategy invests in liquid Exchange Traded Funds (ETFs) each representing hundreds of individual assets.
Backtest
Past performance is not indicative of future returns. View the full backtest report.
Perpetual Performance
Blackdog 2x has provided a nice alternative to the traditional 60/40 portfolio. Since its inception in April 2014. It has consistently outperformed its benchmark, AQR Capital risk parity fund.
Model Portfolio
Past performance is not indicative of future returns. View the full live portfolio.
Lucena Model Portfolio: Dynamic Short-Only
The Dynamic Short Only strategy is a combination of seven different Event Studies designed specifically to identify short opportunities. The Event Studies are based on Lucena’s proprietary technical and fundamental factors. The backtest combines short positions from each model and equally allocates them based on available cash and buying power.
Backtest
Past performance is not indicative of future returns. View the full backtest report.
Perpetual Performance
Beyond beating shorting the S&P (SH as a benchmark), the Dynamic Short Only strategy has generated alpha since its inception in January 2019. The strategy’s key objectives are to outperform the ProShares Short S&P 500 (SH) in returns.
Model Portfolio
Lucena Model Portfolio: Spdr ETF Hedged
Spdr ETF Hedge is a long/short market neutral strategy. The core holdings are made of large sector spdr ETFs for which allocation is optimized for a max Sharpe (using Markowitz MVO). The optimized core is further hedged with short constituents from bearish event studies. The strategy’s goal is to account for sector rotation while protecting the portfolio from sudden and protracted market correction.
[br]Perpetual Performance
Lucena Model Portfolio: Market Neutral Tech Hedged
Lucena Model Portfolio: TieBreaker
TieBreaker is an actively managed long/short strategy. It invests in US-based large-cap equities and tilts its long/short exposure based on market risk. Its main objectives are to accrue returns over time while maintaining low beta, low volatility, & low correlation to the S&P 500.
Backtest
TieBreaker has provided consistent positive returns every year since its inception in April 2014. The strategy has demonstrated accrual of returns over time while maintaining low beta, low volatility, and low correlation to the S&P 500.
Lucena Model Portfolio: Utilities Live
