Risk Parity Alongside the Convergent and Divergent Systems

[gdoscher]

Hi there, first off, very appreciative for this incredible resource and the level of documentation and detail. It's a very beautifully designed system.

I don't believe I'm duplicating any discussions here, but would anyone have any thoughts or guidance on running a buy and hold type risk parity (or smart beta) within the pysystemtrade framework, alongside all the other strats? The beauty of the current system is the relatively low correlation to traditional portfolios so it seems like it would be a win to tack something like that on and use the same handcrafting principles to allocate to that as well as the rules that run across all markets. Perhaps given the way this is constructed, it might be better/easier just to run that completely separately but just wanted to see what people's thoughts were. Thanks so much.

[robcarver17]

This would be trival to achieve by adding a long only forecast (+10) trading rule, and giving it some appropriate forecast weight.

Would make sense if this was your only investment, but would make less sense if you are allocating to this along with traditional long only investments.

[gdoscher]

Thanks Rob. Yes, aside from real estate and private company ownership, the goal is just to have this manage the entirety of my liquid assets so incorporating a beta component seems to make sense from a portfolio perspective. Having it folded into pysystemtrade would also allow me to set the vol for the entire portfolio factoring in all three buckets (beta, convergent and divergent). I'm adapting the code you included with your last book (Chapter 4 I believe) and if I'm able to get it worked in, I'll share the code here so others can use it as well if they like.