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Hedge funds are known for their aggressive growth portfolio, which has the potential for high returns but with the associated risk factors. Hedge funds strategically plan asset investment in different sectors for subsequent downside protection. All investment managers have their own gameplay to try to ensure that the odds are stacked in favour of their clients when it comes to returns for investments.
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Hedge funds are known for their aggressive growth portfolio, which has the potential for high returns but with the associated risk factors. Hedge funds strategically plan asset investment in different sectors for subsequent downside protection. All investment managers have their own gameplay to try to ensure that the odds are stacked in favor of their clients when it comes to returns for investments. Every such strategy has something new to offer in the world of investment planning and many experts like James Velissaris, David Kabiller and Ray Dalio, believe in the use of the best strategies for achieving profits while understanding the risks associated with them.
In the present times the scenario is very different from what it was ages ago, today we have numerous financial strategies like constant-weight asset allocation, tactical asset allocation or bottom-line asset allocation strategy penned by the stalwarts of investment planning.Let us understand one of the investment strategies, penned by James himself for an academic research to identify what are the other approaches that can allow us to minimize our risk. Quantitative investment strategy: This strategy combines the mean reversion and momentum investment strategy to create a statistically balanced risk/reward ratio.
This strategy makes an investment flexible to the fluctuation and depreciation of a stock at a certain point in time, keeping the portfolio dynamic to the changing market environment. This is made possible because it focuses on seamless coordination of tracking a high valued asset price converging back to its average price over time while indulging in momentum investing to attain maximum profit. Like every investment strategy, this strategy has its risk factors and nowhere promises a no loss realm, and the same was seen in the August 2007 quantitative equity downturn. This downturn helped the strategy to be looked at more closely by implementing additional risk parameters. Experts like Velissaris were eventually led to believe that there is a potentially great market cap in a finer time scale.
This approach was later put to test in the 2008 market decline and 2009 steep growth, wherein this strategy was able to generate strong risk-adjusted pay-outs. As understanding and being on the watch for a varying time scale helped to instrumentally identify the mean reversion and complement it with an apt momentum investment, to diversify losses and maximise profit. The beliefs of experts like James Velissaris open up avenues for study into future research to evaluate the effect of different variable components in momentum and mean reversion strategy, to make this strategy accommodating any variables that could be seen in this volatile market. As compared to the single model this strategy is much more reliable in mitigating your risk with a flexible portfolio available at your disposal.
Strategies are essential to every investor and not just individual investors but also for major hedge funds. We have scholars like Jim Simons who indulge in Mathematical and statistical strategies to identify right sets of investment. It is therefore, crucial to remember that we identify the right investment strategy for ourselves, as all of them carry their own set of risks & rewards.SOURCE CREDIT: https://medium.com/@jamesvelissaris21/understanding-quantitative-investment-strategies-65d3ef1762b0
