39 lines
1.5 KiB
Matlab
39 lines
1.5 KiB
Matlab
clear;
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% 1 minute data on EWA-EWC
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load('inputData_ETF', 'tday', 'syms', 'cl');
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idxG=find(strcmp('GLD', syms));
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idxU=find(strcmp('USO', syms));
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x=cl(:, idxG);
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y=cl(:, idxU);
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% lookback period for calculating the dynamically changing hedge ratio
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lookback=20; % Lookback set arbitrarily short
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hedgeRatio=NaN(size(x, 1), 1);
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for t=lookback:size(hedgeRatio, 1)
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regression_result=ols(log(y(t-lookback+1:t)), [log(x(t-lookback+1:t)) ones(lookback, 1)]);
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hedgeRatio(t)=regression_result.beta(1);
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end
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y2=[x y];
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yport=sum([-hedgeRatio ones(size(hedgeRatio))].*log(y2), 2); % The net market value of the portfolio is same as the "spread"
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hedgeRatio(1:lookback)=[]; % Removed because hedge ratio is indterminate
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yport(1:lookback)=[];
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y2(1:lookback, :)=[];
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plot(yport);
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%
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numUnits=-(yport-movingAvg(yport, lookback))./movingStd(yport, lookback); % units invested in portfolio. movingAvg and movingStd are functions from epchan.com/book2
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positions=repmat(numUnits, [1 size(y2, 2)]).*[-hedgeRatio ones(size(hedgeRatio))]; % [hedgeRatio -ones(size(hedgeRatio))] is the dollar capital allocation, while positions is the dollar capital in each ETF.
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pnl=sum(lag(positions, 1).*(y2-lag(y2, 1))./lag(y2, 1), 2); % daily P&L of the strategy
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ret=pnl./sum(abs(lag(positions, 1)), 2); % return is P&L divided by gross market value of portfolio
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ret(isnan(ret))=0;
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figure;
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plot(cumprod(1+ret)-1); % Cumulative compounded return
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fprintf(1, 'APR=%f Sharpe=%f\n', prod(1+ret).^(252/length(ret))-1, sqrt(252)*mean(ret)/std(ret));
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% APR=0.088863 Sharpe=0.504153
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