Plan To Survive: Be Systematic! (Part 2)

Aug. 05, 2015 10:39 AM ETSPLV, SPY, TMF, UUP, VXX, ZIV12 Comments
Harry Long profile picture
Harry Long


  • Surviving this environment is tough.
  • Investors need evidence-based methods (EBM).
  • This series will provide some tools.

This year, we will focus on strategy indices which have a low correlation to both stocks and to bonds.

As always, our cutting-edge strategy indices are only available to subscribers, but I hope that some of the strategy indices presented here will provide inspiration for readers to create their own methods for dealing with an increasingly difficult investment environment.

Remember, hope is for people who do not use data. Wise investors plan using evidence-based methods.

Please note that even though the rules of this strategy index have been publicly released, like any other index, we require the execution of a licensing agreement with ZOMMA LLC for any form of commercial use whatsoever.

ZOMMA Quant Warthog III


I. Buy ZIV (ZIV) with 15% of the dollar value of the portfolio.

II. Buy SPLV (SPLV) with 50% of the dollar value of the portfolio

III. Buy TMF (TMF) with 10% of the dollar value of the portfolio.

IV. Buy UUP (UUP) with 20% of the dollar value of the portfolio.

V. Buy VXX (VXX) with 5% of the dollar value of the portfolio.

V. Rebalance annually to maintain the 15%/50%/10%/20%/5% dollar value split between the instruments.

Here are the results in a log scale:

The low correlation to long duration government bonds is superb. The low correlation to the S&P 500 is similarly excellent. Here is a graph of the strategy index vs. the SPY (SPY) ETF in a log scale:

The strategy index has a low 0.33 correlation to the SPY ETF. The index beats the SPY by a little over 1 percentage point per year, while reducing the maximum drawdown vs. the SPY by over 10 percentage points.

The intuition behind this excellent performance is that the strategy generates return through the SPLV S&P 500 low volatility ETF and

This article was written by

Harry Long profile picture
Harry Long is the inventor of Hedged Contango Capture and Hedged Convexity Capture and is the Managing Partner of Zomma, an innovative algorithm creator.Mr. Long is a globally recognized expert on the research and development of algorithmic investment strategies. The Zomma IP portfolio of algorithms is sought after by asset management firms, investment banks, hedge funds, principal trading organizations, index providers, ETP sponsors, energy companies, and private equity firms to help them develop and deploy competition crushing algorithmic investment strategies.Mr. Long's algorithms have been used by institutions such as: CargiilMacquarieCastletonFreepoint Commodities.Zomma helps institutions create long term value by replacing emotional decision making with cutting edge technology based upon objective evidence.Mr. Long is a graduate of Rice University with a B.A. in Economics.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ZIV, SPLV, TMF, UUP, VXX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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