The opinions expressed in these forums do not represent those of C2, and any discussion of profit/loss is not indicative of future performance or success. There is a substantial risk of loss in trading. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You should read, understand, and consider the Risk Disclosure Statement that is provided by your broker before you consider trading. Most people who trade lose money.
That’s a good point.
If the S&P 500 is in a 30% drawdown (from its all time high) and System A earns 25% while System B loses 1%, during that same period of time, for example, then we can be reasonably sure that System A and B are uncorrelated, assuming both systems trade the stock market (stocks, ETF, options, index futures).
However, uncorrelated systems do not necessarily have a long term trading edge, and cannot offer any kind of guaranteed return, even if the risk is smaller.
First try to find systems with an edge. They don’t have to be perfectly uncorrelated. If they are good systems with an edge, there is a high probability that they won’t have a major DD around the same time. A major DD in any good system should be a rare occurrence. Then this rare occurrence happening at the same time across many systems will be even more rare.
Correlation is perfectly fine in good and even flat periods.
