GBA Workbench – Simple Momentum, Different Weighting Strategies¶

This version of the Momentum Strategy is a simplified version. The only parameters are the single lookback period for calculating momentum (in months) and the maximum number of top “x” ranked stocks to invest in.

However several different weighting strategies are provided:

  • “Equal Weighting”
  • “Minimum Volatility Weighting”
  • “Targeted Volatility Weighting”
  • “Inverse Volatility Weighting”

In the backtest below:

  • A middle range risk tolerance of 10 has been used (on a scale of 1 to 20)
  • Maximum Long Instruments is the top 8
  • All lookback are 3 months
  • Upper and lower bounds for weightings are (0.0, 1.0)
  • Re-allocation is monthly
  • The portfolio consists of 30 US listed ETF country funds and bond mutual funds

momentum1

Stat                 Momentum Equal Weighted    Momentum Targeted Volatility    Momentum Inverse Volatility    Momentum Minimum Volatility
-------------------  -------------------------  ------------------------------  -----------------------------  -----------------------------
Start                1996-06-20                 1996-06-20                      1996-06-20                     1996-06-20
End                  2016-12-20                 2016-12-20                      2016-12-20                     2016-12-20
Risk-free rate       0.00%                      0.00%                           0.00%                          0.00%

Total Return         659.67%                    765.30%                         820.59%                        892.64%
Daily Sharpe         0.76                       0.78                            0.89                           0.87
CAGR                 10.40%                     11.10%                          11.44%                         11.85%
Max Drawdown         -20.46%                    -24.51%                         -17.84%                        -21.83%

MTD                  -0.24%                     0.78%                           -0.34%                         2.11%
3m                   -2.11%                     0.11%                           -2.64%                         1.36%
6m                   -1.36%                     2.10%                           -1.65%                         4.02%
YTD                  -7.23%                     -3.85%                          -6.01%                         -0.08%
1Y                   -5.69%                     -1.73%                          -4.62%                         1.92%
3Y (ann.)            -1.98%                     0.45%                           -1.12%                         1.01%
5Y (ann.)            2.11%                      2.51%                           2.75%                          1.99%
10Y (ann.)           6.28%                      7.24%                           6.99%                          6.61%
Since Incep. (ann.)  10.40%                     11.10%                          11.44%                         11.85%

Daily Sharpe         0.76                       0.78                            0.89                           0.87
Daily Mean (ann.)    10.95%                     11.66%                          11.71%                         12.20%
Daily Vol (ann.)     14.47%                     14.97%                          13.17%                         14.08%
Daily Skew           -0.27                      -0.37                           -0.19                          -0.31
Daily Kurt           4.30                       5.60                            5.03                           5.27
Best Day             6.16%                      5.99%                           6.09%                          5.10%
Worst Day            -6.79%                     -8.55%                          -6.56%                         -7.84%

Monthly Sharpe       0.80                       0.81                            0.95                           0.91
Monthly Mean (ann.)  10.83%                     11.58%                          11.62%                         12.11%
Monthly Vol (ann.)   13.53%                     14.27%                          12.29%                         13.24%
Monthly Skew         0.26                       0.05                            0.31                           0.19
Monthly Kurt         1.35                       2.21                            2.21                           1.88
Best Month           16.00%                     18.02%                          15.92%                         14.18%
Worst Month          -11.19%                    -11.44%                         -10.97%                        -10.84%

Yearly Sharpe        0.72                       0.80                            0.84                           0.82
Yearly Mean          11.01%                     11.59%                          11.89%                         12.38%
Yearly Vol           15.34%                     14.45%                          14.22%                         15.01%
Yearly Skew          0.73                       0.34                            0.94                           0.95
Yearly Kurt          -0.10                      -0.40                           0.15                           -0.22
Best Year            42.85%                     42.80%                          42.01%                         45.40%
Worst Year           -9.10%                     -10.26%                         -6.23%                         -5.55%

Avg. Drawdown        -2.89%                     -2.74%                          -2.46%                         -2.61%
Avg. Drawdown Days   38.21                      37.41                           34.99                          37.29
Avg. Up Month        3.28%                      3.15%                           2.79%                          3.12%
Avg. Down Month      -2.51%                     -3.03%                          -2.36%                         -2.47%
Win Year %           65.00%                     75.00%                          80.00%                         80.00%
Win 12m %            73.73%                     76.69%                          79.66%                         77.54%
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