Jun 16, 2018
in Relative Strength, Video
A video showing how to backtest more than 25 securities at a time. The public video below uses the following subscriber-only backtest ETFreplay Relative Strength Backtest - Combine Portfolios
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Apr 30, 2018
in Relative Strength, Moving Average, Video
A video using ETFreplay Backtesting to look at some relative strength concepts and a moving average filter (daily).
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Jan 11, 2018
in Relative Strength, Video
A short video using the Advanced RS Pro backtest to look at how you can model the effect of Advisor-level fees over long periods of time.
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Dec 05, 2017
in Relative Strength, Video
A short video using the Advanced RS Pro backtest to look at how mixing strategies together performed during the 2000-2002 and 2008 bear markets..
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Sep 14, 2016
in Relative Strength
Why does your Relative Strength ranking of ETFs, work better than ranking them using the Sharpe Ratio?
The ETFreplay Relative Strength ranking methodology has the Sharpe Ratio concept at its core but it also reflects some more modern financial modelling methodologies.
So the Sharpe Ratio has volatility in the denominator. The thing about this is that the Sharpe Ratio effectively overrates very low volatility ETFs. In reality, investors value returns more than they do extreme low volatility. For example, a 12% return with 8% volatility is viewed much more positively than an 8% return with 4% volatility. That move from 8% down to 4% is not nearly as meaningful as the return differential. What investors really want is a solid return with acceptable volatility. Investors can tolerate some level of drawdown with a long-term focus -- just not large drawdowns.
Another thing we did was enable the user to use 2 timeframes for return. The reason is that it is well-accepted that a model can have up to 3 factors as the factors can help each other out. More than 3 factors starts to run into data-mining, which is something we need to be careful of.
Sometimes 1 factor which backtests well over longer time periods can have a rough patch. Another factor can help mitigate the problems and by using 2 return periods, we are not overly reliant on a single return factor.
Hope that helps and let us know if you have any other questions or comments.
See also our FAQ's for common questions