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Omega Analysis Stormy Weather Strategy

This strategy combines the revolutionary Omega Metrics® risk technology with a new paradigm for trend following.

Using our trend analysis and Market Modes we identify ‘red alert’ periods where markets are likely to move ‘sideways’ prior to falling precipitously.

The Stormy Weather Strategy employs long short trading algorithms through these danger periods to provide alpha through the sideways and downturn periods.

The trading algorithms employ a variety of proprietary trend identification techniques in which they ‘learn’ parameter settings that maximise return subject to a fixed ES budget over the sample period.

Based on their return to drawdown performance, several of these independently optimised strategies are selected. They are deployed simultaneously, sharing an ES risk budget. The proportion of the risk budget which is in use on any day depends on the degree of unanimity among the strategies about the market trend. This means that when strong trend signals are present larger positions are taken while signals that are interpreted differently by different strategies may result in positions that are close to flat.

This multi-layered approach to risk control is very effective in producing returns with low volatility and drawdown. Our approach has proved robust in a variety of markets and, in particular, has performed very well since August 2015 in the US equity market.

The Stormy Weather Strategy avoids the need for costly downside insurance. It is designed to protect an equity investment from the next large correction while adding alpha while we wait for that event.

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