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By Rich B

Diversification for Trend Following Models

The Small Variations Matter In the realm of trend following, one prevailing assumption is that highly correlated assets should not be traded together, as they are unlikely to provide diverse opportunities. However, this article will challenge this notion by delving into the nuances of trade correlations versus price correlations. By examining the behavior of different […]
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By Rich B

The Lifting Power of Outliers

Introduction In previous posts, we’ve explored how massive diversification serves as a crucial tool for outlier hunters—not only to provide correlation benefits in chaotic regimes but also to increase our chances of capturing rare market events. It’s the frequency of these outliers in our trade distribution that significantly enhances our long-term performance. In this post, […]
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By Rich B

Challenging the Conventional Wisdom of Statistics in Complex Adaptive Systems – Beware of Idealised Models

In the ever-evolving landscape of financial markets, the application of traditional statistical models, such as the Central Limit Theorem (CLT), often proves to be inadequate for capturing the complexities of complex adaptive systems (CAS). These systems, which are a hallmark of financial markets, defy the conventional assumptions of linearity, independence, identical distribution, and stationarity, which […]
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By Rich B

Let’s Consider Skew

As diversified systematic trend followers, we just love the positive skew of our trade results….but to explain why, we need to dig quite deeply into what skewness means exactly. It is defined as a measure of asymmetry of a trade distribution about its mean and is expressed by the following formula. Now it is important […]
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By Rich B

Navigating the Unpredictable Seas of Financial Markets

In the world of financial markets, where unpredictability and volatility are the norms, achieving long-term success is a major challenge. These markets are filled with potential risks and opportunities, making the ability to navigate through uncertainty an essential skill for investors and traders aiming for growth and stability. Diversified systematic trend followers are a group […]
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