Steady Vol + Skewerage = Vengeance

Recently Big 'O' Sharpe scrubbed out my Steady Vol and Skewerage strategies.

I've never been sentimental.

Bullet to the head. Move on.

But Wait! I forgot, that I once combined both strategies together, like so,

weight.INDEX_SP500 = 1 / realisedVol - skewChange;

and weighted on a monthly basis.

How does this 'League of Justice' fare?

Pretty well - finally something has survived this Big 'O' Sharpe massacre!

The S&P 500 has a Sharpe Ratio of 0.42 over the last 25 years, whereas 'Dawn of Justice' has a Big 'O' Sharpe of 0.5. A 20% improvement!

And remember Big 'O' Sharpe is the worst Sharpe we could generate, it's the conservative figure.

Essentially what we are seeing is that in any scenario we could generate the 'League of Justice' strategy avoided the mayhem of 2008.

The Big 'O' Sharpes of Steady Vol alone during this period is 0.4 and Skewerage still has a meagre 0.16; but combine them together and magic happens.

We exaggerated our heroes' untimely deaths.

Oh, and what Sharpe does 'Best' end up with? What does ameliorating the dot com bust give us?

It gives us 90% better performance, jumping to 0.75. We have to be lucky to hit that - but if we focus on the Big 'O' Sharpe of 0.5 (and 20% outperformance) we shouldn't be unlucky at the very least.