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Rajeev Seth
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Rajeev Seth is the Managing Director of BeatIndex, an investment management consulting firm. Specializing in quantitative investment management, he has consulted for many diversified asset managers, and startup hedge funds. The philosophy of BeatIndex is that one can indeed beat indexes, by a... More
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  • Our stock pairs trader is better than ALT, the supposed "hedge fund in a box", and better than SPY, gives 63%+ return, and 2.3% low drawdown 0 comments
    Sep 12, 2010 11:43 PM | about stocks: ALT, SPY, SPY

    For those individual investors who want a better than near 0% return on their money without losing sleep at night, here's a proposal. Follow the simple trading signals issued by my Stock Pairs Trader system


    Check out the performance statistics collected independently by collective2.com, which assigns it a C2 score of 988 out of 1000. This simple to follow (for the retail investor) system has been outperforming the S&P500 for the last 8 weeks. Since its public launch date of July 22, 2010 it has outperformed the S&P500 by 4.9% percentage points. See the chart in this link below:


    As you can see from the annualized return for this model has been 63%
    The Sharpe ratio of this performance has been an outstanding 4.3, which means the excess return has been about 4.3 times the risk taken. This is mainly because there has been virtually no risk once each long position has been paired off with its corresponding matched short position. I did not say, there is absolutely no risk, because there is always a small possibility that the two positions can deviate farther away. However, the risk is so low that the 

    Max peak-to-valley drawdown (historical) was only 2.43%
    and the
    Correlation w/ S&P was -0.01
    So this fund is as good as cash as it has a really low drawdown, while providing you a steady upward return, while having no correlation to the S&P500.

    As a hedge fund, my system is proving to be far superior to the professionally managed iShares offering of ALT.
    In the same time, ALT, the purported "hedge-fund in a box" has achieved a return of 0.86% in the period 7/22/2010 to 9/10/2010  

    So, for a worry free return on your cash, do not put money in ALT, or SPY, but follow the trading signals given by


    Enter each new paired trade signal you receive, building up your portfolio as time goes by. Enjoy the rewards within a month or two as those pairs are unwound

    Disclosure: None
    Stocks: ALT, SPY, SPY
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