Optimizing Ivy Portfolio (2)

Last time we attempted to optimize an Ivy Portfolio with very conservative rules to implement the principle of “winning by not losing” and it went quite well. Now just as Quantum Financier mentioned last time, what if we loose some constrains? Presumably, we should be rewarded by more return for taking extra risk.

To make it more observable, I started from the CVaR Ivy Portfolio in my last post and changed several rules below. All of these changes are essentially telling one thing to the model, “go out there to take more risks”.

1. Optimizer: Minimize CVaR -> Maximize Sharpe Ratio (minimizing variance and maximizing expected return at the same time)
2. Timing Signal: 12-month SMA -> 12-month EMA (focusing more on short-term momentum)
3. Weight Constrain: [0, 1] -> [-0.5, 1.5] (higher leverage)
4. Number of assets in the portfolio: 3 -> 6 (broader coverage)

Yep, the plan works. And as we expected, we exposed ourselves to higher drawdown risks at the same time.

2 thoughts on “Optimizing Ivy Portfolio (2)

  1. Hi,

    Any chance you could share the R code that used for this test? Thanks for your help.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s