Friday, February 8, 2013

T2 Bonds & Fixed Income..2.8.13

Today we look at 2 versions of a T2 model of bonds and fixed income issues.  DVY and SDY are the dividend  ETFs of the Dow and the S&P.  They typically run in sync and when they divert its usually not for long.  Many of the large bond fund managers are betting against bonds and other fixed income this year and based on a 2 year lookback the payoff has not been stellar although volatility has been very low (note the RSQ of the top 11 model below.
The two versions cited here are using a top 2 and a top 11 run.  The top 11 also included gains from the SPY and the top 2 run included gains when SPY is in the top 2 slots.
Perhaps surprisingly, just running the top 11 model without SPY produces almost identical 2 year returns with a whole lot less risk