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Armansky

List - or pair-wise approach

April 22nd, 2019, 11:55 am

Hi all,

Let's assume that I have available historical data and I am asked to implement a prototype trading strategy using basket trading.
More concretely, I need  to solve the problem of ranking the shares included in the S&P500 index once a period  using a list - or pair-wise approach. Market-neutral portfolio should be generated based on the resulting ranking. Ranking can be performed within specific sectors.

Who faced with such an approach ? Any thoughts how this task can be solved ?
 
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Alan
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Re: List - or pair-wise approach

April 23rd, 2019, 12:55 am

Sounds like a homework assignment. Perhaps simply rank stocks in each industry by historical performance. Buy the top half and short the bottom half in equal dollar amounts. Repeat for each industry. How often to rank and rebalance left to you -- this is the data mining part.  :D

Pretty meaningless, but should look impressive historically, and maybe will satisfy your instructor...