While January was bliss, February has been a bloodbath.  The graph above illustrates the YTD return of my investment strategy (ParaTopia) compared to the corresponding return if one had bought a piece of the market ( OMX Stockholm 30 index ).  Based on the YTD results so far, compared to the benchmark, my strategy seems to do better in good times albeit worse in bad times.  Looking at the individual constituent performance in Feb’23, everything looks ugly. With ALIV, TEL2, and TELIA (finally!) being the only ones above zero.  

The devil is in the detail they say. And one detail that has been nagging me extra lately is the issue mentioned in A few simple rows – Restated  that I’m still not sure if my model successfully can ensure positive asset weight only. A feature which I believe is essential for having an investment strategy accessible to anyone, and not only hedge funds. As you will see in this post, this issue is an easy fix. Although, the solution was not what I expected.  I will demonstrate two different models for obtaining dynamic and optimal values of theta, followed by two different methods for translating these thetas into asset weight within my portfolio. In total, this will result in four different model+method combinations for which each combination’s portfolio performance is presented in the end. Are you ready? Model A The first model is the one currently used for obtaining the values of theta within my investment strategy up to date. Since I have already shown you all details behind...

This month, I continue buying stakes in ALIV together with primarily ALIV and KINV. My investments are expected to enter the market on Monday, 6th Feb 2023, and the allocation is presented as below.  Again, I use my dynamic investment strategy (see A few simple rows – Restated ). This month, however, the thetas derived by my strategy (-54.6 for dolvol and -2.14 for momentum ) seems truly extreme.  The -54.6 dolvol theta tells me to put as little weight on liquid stock as possible. Meanwhile, the -2.14 momentum theta tells we to invest in past losers rather than past winners. The latter seems a bit controversial strategy wise, don’t you think?