BCalc™ Equities/Bonds ETF Strategies 

BCalc™ Equities/Bonds ETF Strategies can help automate major diversified portfolios.

The following table summarizes the performance of various use cases of Tradagon’s BCalc S&P500 ETF Strategy and BCalc T-Bond ETF Strategy as well as their combined portfolio.

Figure 1 illustrates the 57-year backtest results of Tradagon’s BCalc S&P500 ETF Strategy.  This is a very low turnover strategy with average holding periods ranging from 9 months for shorts to over 2 years for longs.  The strategy is long 70% of the time, short 10% of the time, and flat for the remaining 20% of the time.  The strategy has been applied directly to the SPX index rather than the corresponding ETF, SPY, since the index has a much longer history.  The chart shows the weekly account values for three BCalc use cases - LongsOnly (unlevered), Long&Short (unlevered), and Long&Short-2X (50% leverage).  Also shown are the Buy&Hold value of the index as well as the Alpha and Beta for the Long&Short (unlevered) use case. The backtests run from Jan 1961 to Feb 2018.

Fig. 1

The figures below illustrate the drawdown for S&P500 Buy&Hold and the superior drawdowns for the two Long&Short use cases of the BCalc S&P500 ETF Strategy:

Figure 2 illustrates the 10-year backtest results of Tradagon’s BCalc T-Bond ETF Strategy used with TLT, (the iShares long-term Treasury Bond ETF).  The strategy can be used with any ETF’s tracking the long-bond index and is a low turnover strategy with an average holding period of a little over 3 months.  The chart shows the daily account values for three BCalc use cases - Long&Short (always-in), LongsOnly and ShortsOnly.  Also shown are the Buy&Hold value of the ETF as well as the drawdown for the L&S use case. The backtests run from July 2007 to Feb 2018.

Fig. 2

Figures 3-4 below show the 10-year results of combining the BCalc S&P500 and T-Bond ETF Strategies into a BCalc SPY+TLT Portfolio.  Fig 3 illustrates the unlevered portfolio and Fig 4 the 2X-levered portfolio.  Each chart shows the weekly account values for the two individual strategies, which complement each other nicely, as well as their average - the portfolio value.  Also shown are the Buy&Hold values for SPY & TLT and the drawdown for the portfolio.  Note that in each case the portfolios have higher returns than the BCalc S&P500 ETF Strategy by itself, and lower drawdowns than either strategy by itself.

Fig. 3

Fig. 4

About the backtests: The backtests are run on weekly data for the SP500 index and daily data for TLT.  Each backtest starts out with $1M (USD) in initial capital, which is fully invested/re-invested in each subsequent trade in that symbol, with the specified initial leverage.  There are no stops or profit targets, and no scaling-in or scaling-out. Any open trade at the end of a run is marked as closed and included in the trade count. Commission, slippage & stock borrow expenses are not included.  Alpha & Beta computations assume risk-free return = 0.

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