Thanks, yes, of course. I apologize a bit for being dense.
So on the whole, if we are truly market neutral, fiveHedged is up about 5% over the 2.5 months since starting, due to excellent stock picking, and with exceptionally low drawdown during a trying period in the market. Well done, @fiveHedged.
My earlier mis-analysis remains cogent in a limited sense. Compared to the S&P500 benchmark used on C2, fiveHedged outperformed as a whole, but differently in market up days than market down days. Possible explanations are likely something like this:
During the market down periods, fiveHedged performed very well compared to S&P500.
A) Due to picking stocks that went down less than the market average, or
B) Due to hedging with a short IWM position that moved up faster than the S&P500 went down.
During the market up periods, fiveHedged underperformed compared to S&P500.
C) Due to picking stocks that rose less than rapidly than the market average, or
D) Due to hedging with a short IWM position that lost value faster than the S&P500 gained value.
I won’t do the deep dive into which is what, but IWM did move down faster than SPY to the Dec 24 low, and has moved up faster than SPY since that time, so (B) and (D) certainly seem to play a role in my observations. When the S&P500 gets back up to 2659 where it was when the strategy started, we’ll have a better idea what the “pure alpha” return really is here. As IWM started around $147, perhaps it will be back right at $147 at that point (it should be close), making the comparison simpler. Hoping for the best here, really I am. But “pure alpha” is a theoretical construct; all real implementations have imperfections. But that equity curve looks very attractive.
Perhaps I can plead temporary insanity for my ignorance of the basic market-neutral setup here. After all, the title of the post is “Up 4% in 3 Days…”, not the kind of performance anyone expects to achieve in a market-neutral, unlevered stock-picking strategy (with a fundamental value slant, no less).
Again, hoping for great things here.