Any Strategies Applying Sharpe Ranking?
Author: swuzy
Creation Date: 5/30/2015 9:43 AM
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swuzy

#1
There is an interesting article today in Seeking Alpha on ETF Country Rotation With Treasury Hedge Using Sharpe Ranking.

http://seekingalpha.com/article/3222126-the-world-country-top-4-etf-strategy-a-way-to-fight-rising-rates-and-a-stalling-u-s-stock-market?ifp=0

This is also a popular topic / concept often discussed in local Silicon Valley AAII Computerized Investing / Mechanical Investing Group.

E.g., Sharpe Parity Tweaking Parts 1, 2, 3, 4 at: https://www.youtube.com/watch?v=5nnbFz3OWAY

Are there any WL strategies applying Sharpe ranking to filter or select stocks or ETFs on a rotational basis? Is it feasible or if not, are there any work arounds?

Belying my ignorance, is there anything like a Sharpe indicator for symbols that can be applied to a strategy code? If not, is it possible to create an indicator based on Sharpe ?
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Eugene

#2
QUOTE:
The normal Sharpe ratio is calculated by Sharpe = rd/sd, with rd = mean daily return and sd = standard deviation of daily returns.


To modify the built-in RSI Rotation strategy to use Sharpe as per the article:

1. For mean daily return, you can take ROC.Series(Close, period) or rd
2. For standard deviation of daily returns, I guess you take StdDev.Series(rd, period, type)
3. Then you divide them i.e. rd / sd
4. Finally, follow the FAQ on changing the RSI Rotation system to a different rotation rule and you arrive with something like this on top of line 67:

CODE:
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This was the "rough" formula. The actual formula including volatility is up to you.
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swuzy

#3
Thank you.

Here is a note as to the rules of the Sharpe Parity Tweaking item from the sv AAII CI-MI presenter.

https://onedrive.live.com/redir?resid=ad2a52a0dd20d1a8!204989&authkey=!AGB3eXwU9IPxKsU&ithint=file%2cpdf

Also related is a Volatility equation for the rebalancing between cash (or treasuries) versus equities.

https://onedrive.live.com/redir?resid=ad2a52a0dd20d1a8!205020&authkey=!AHhDz99XdIzEEok&ithint=file%2cpdf

How might one code that Macquarie volatility weighting for cash or Treasuries vs equities into the rules of the Sharpe rotation strategy here?