Wednesday, February 20, 2013

AB Model..2 Views...2.20.13

To illustrate the differences in the fixed variable position AB model and the T6 Lab approach here is the same portfolio currently updated on both platforms as of yesterday's close.
The differences are...AB has no momentum rotation feature...we just hold the portfolio in the stated proportions and rebalance position sizing monthly.  This is a delta neutral approach with an equity / bond balance minus the influence of the treasuries. This is a slow, steady capital appreciation no turnover tactic.
The T6 Lab approach is more dynamic and may requires more maintenance in term of trading and exercising stops.  The results shown do not reflect implementation of the various stops suggested...RSQ cross, P6 downslope, etc.  since each investor must determine his own risk comfort level and apply stops accordingly.
In the first T6 view (below) our momentum ranking has favored IWM and SPY for the duration of our lookback.  This top 2 setup has required no trading since 1.25.13 and we have managed to beat SPY in each short term time frame through the 30 day period.  The 2 year return has underperformed SPY and that can be traced to periods when the equity curve was below the RSQ and/or the P6 was downslope relative to the equity active risk management does make a difference.
Finally, here's a snip of the same T6 Lab with a top 6 approach...all in all the time. Our long term returns almost match SPY but with less volatility.  The position sizes are all equal also....which varies from the AB variable model.  You can check out the full nuances of this model on the T6 software at your convenience.