"Hot Potato" anyone??

Discuss your favourite picks, broker, and trading or investment style.
User avatar
adrian2
Diamond Ring
Diamond Ring
Posts: 11503
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Re: "Hot Potato" anyone??

Post by adrian2 » 01 Jun 2017 18:31

AltaRed wrote:
01 Jun 2017 17:30
Dumb question from someone never before in this situation: Is there any conflict having the same asset in an RRSP as a non-reg account (in my case XEF). Seem to recall issues around superficial loss rules?
The RRSP is "an affiliated person", therefore if you intend to realize a loss in non-reg, your RRSP should not have bought the same security in the +/- 30 days window.
Imagefiniki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

User avatar
AltaRed
Diamond Ring
Diamond Ring
Posts: 18082
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: "Hot Potato" anyone??

Post by AltaRed » 01 Jun 2017 18:38

Thanks. Hopefully never will run that risk if I give this strategy a go. XEF is what I'd want for the Int'l leg.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom

oppositeset
Bronze Ring
Bronze Ring
Posts: 20
Joined: 18 Mar 2016 02:49

Re: "Hot Potato" anyone??

Post by oppositeset » 03 Jul 2017 18:13

I'm moving it all to XEF tomorrow

DenisD
Gold Ring
Gold Ring
Posts: 2445
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: "Hot Potato" anyone??

Post by DenisD » 03 Jul 2017 18:24

Might be wide spreads tomorrow as the US markets are closed.

oppositeset
Bronze Ring
Bronze Ring
Posts: 20
Joined: 18 Mar 2016 02:49

Re: "Hot Potato" anyone??

Post by oppositeset » 03 Jul 2017 18:26

Oh thanks for pointing out

ockham
Gold Ring
Gold Ring
Posts: 1426
Joined: 04 Apr 2006 21:50
Location: The Prairies

Re: "Hot Potato" anyone??

Post by ockham » 03 Jul 2017 22:28

oppositeset wrote:
03 Jul 2017 18:13
I'm moving it all to XEF tomorrow
Yes, the June month end numbers are available. 12 month returns are:
XEF 20.58
XUS 17.40
XIU 12.16
XBB -0.26

Therefore, I'll close my XUS position tomorrow or Wednesday and buy XEF.

ockham
Gold Ring
Gold Ring
Posts: 1426
Joined: 04 Apr 2006 21:50
Location: The Prairies

Re: "Hot Potato" anyone??

Post by ockham » 04 Jul 2017 16:09

Earlier today, sold XUS @ $39.20 and bought XEF @28.871.

jay
Silver Ring
Silver Ring
Posts: 392
Joined: 19 Feb 2008 21:13

Re: "Hot Potato" anyone??

Post by jay » 05 Jul 2017 09:24

Not sure if this came up before, but http://www.portfoliovisualizer.com allows one to back-test the dual momentum strategy. Here is a =5&timingUnits[0]=2&timingWeights[0]=100&timingUnits[1]=2&timingWeights[1]=0&timingUnits[2]=2&timingWeights[2]=0&timingUnits[3]=2&timingWeights[3]=0&timingUnits[4]=2&timingWeights[4]=0&volatilityPeriodUnit=2&volatilityPeriodWeight=0] backtest using XBB,XIC,XSP and XIN .

I chose those ETFs simply because they have more history.

Here is another =5&timingUnits[0]=2&timingWeights[0]=100&timingUnits[1]=2&timingWeights[1]=0&timingUnits[2]=2&timingWeights[2]=0&timingUnits[3]=2&timingWeights[3]=0&timingUnits[4]=2&timingWeights[4]=0&volatilityPeriodUnit=2&volatilityPeriodWeight=0]backtest that uses 2 momentum assets instead of 1.

Click on the Timing Periods tab to see which asset(s) were being held and for how long.

EDIT: the above links won't format properly for some reason, but they work.

ig17
Gold Ring
Gold Ring
Posts: 2341
Joined: 21 Feb 2005 20:54

Re: "Hot Potato" anyone??

Post by ig17 » 05 Jul 2017 10:18

jay wrote:
05 Jul 2017 09:24
I chose those ETFs simply because they have more history.
You picked two ETFs that hedge currency: XSP and XIN. Currency hedging is not part of dual momentum strategy. In fact, it can be seriously counterproductive. See a faq on Gary Antonacci's site:

http://www.optimalmomentum.com/faq.html

There are international stock ETFs that hedge their currency exposure. What do you think about using these with GEM?

There is a tendency for International stocks to outperform U.S. stocks when the U.S. dollar is weak and non-U.S.currencies are strong. This lets us profit from the strength in non-U.S. currencies. When non-U.S. currencies are weak, GEM is often out of international stocks. So there is little reason to use hedged ETFs. GEM automatically deals with exchange rate risk.

Image

BoomBoom99
Newcomer
Newcomer
Posts: 2
Joined: 15 May 2017 18:56

Re: "Hot Potato" anyone??

Post by BoomBoom99 » 05 Jul 2017 10:41

Would not hedged ETFs take the currency risk out of the equation and make the strategy more of a pure play?

ig17
Gold Ring
Gold Ring
Posts: 2341
Joined: 21 Feb 2005 20:54

Re: "Hot Potato" anyone??

Post by ig17 » 05 Jul 2017 11:04

BoomBoom99 wrote:
05 Jul 2017 10:41
Would not hedged ETFs take the currency risk out of the equation and make the strategy more of a pure play?
I think it's the opposite. Hedged ETFs are likely to harm the strategy. US equities tend to outperform non-US equities when US dollar index is rising. International equities tend to outperform when US dollar index is falling.

Here's a clearer version of the chart above:

Image

Source:
http://www.sharpereturns.ca/2015/07/mar ... ected.html
4. Direct relationship between US to non-US stocks ratio and USD

This relationship basically says that the relative performance of US stocks to non-US stocks is mainly driven by changes in USD. This makes sense, since when US stocks are doing better than the rest of the world, foreign investors want to invest in the US. This drives up demand for USD.
11. How is any of this relevant to Dual Momentum?

...

GEM uses relative momentum to switch between US and non-US stocks. According to relationship #4, we see that GEM therefore protects against, and profits from, fluctuations in the US Dollar.

jay
Silver Ring
Silver Ring
Posts: 392
Joined: 19 Feb 2008 21:13

Re: "Hot Potato" anyone??

Post by jay » 05 Jul 2017 13:06

ig17 wrote:
05 Jul 2017 10:18
jay wrote:
05 Jul 2017 09:24
I chose those ETFs simply because they have more history.
You picked two ETFs that hedge currency: XSP and XIN. Currency hedging is not part of dual momentum strategy. In fact, it can be seriously counterproductive. See a faq on Gary Antonacci's site:

http://www.optimalmomentum.com/faq.html
Agreed and I don't use them myself either. I just wanted to point out that portfoliovisualizer.com lets you back-test the strategy with nice elaborate results. I chose the Canadian ETFs with the longest time horizon.

ockham
Gold Ring
Gold Ring
Posts: 1426
Joined: 04 Apr 2006 21:50
Location: The Prairies

Re: "Hot Potato" anyone??

Post by ockham » 01 Sep 2017 13:33

ockham wrote:
04 Jul 2017 16:09
Earlier today, sold XUS @ $39.20 and bought XEF @28.871.
The numbers are in for the 12 months ended August 31. XEF continues to lead with a 12 month return of 12.83% (as against XUS at 10.64%, XIU at 7.76% and XBB at -1.67%). Therefore, no changes to the Hot Potato Portfolio required.

Rhinox87
Newcomer
Newcomer
Posts: 3
Joined: 14 Jun 2017 22:57

Re: "Hot Potato" anyone??

Post by Rhinox87 » 27 Sep 2017 13:46

Looks like a good strategy for a part of total capital.

I'm curious if anyone has tried including Emerging markets as another asset class in the Canadian backtest of this strategy. I have seen a backtest with Emerging markets included as an asset class in USD and the performance seems to increase with some additional volatility. Risk-adjusted returns remain similar. But, higher performance with additional volatility may be preferred by some with higher risk-tolerance, especially in a registered account where leverage is limited.

Post Reply