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 Forums ›› Technically Speaking ›› Automated Trading ›› Help with determining Portfolio Volatility

 hondia   Registered: Sep 2012 Posts: 3 09-11-12 06:15 PM Hello, This is my first post on this forum. I've searched and this looks like the best forum for people interested in ATS to share their thoughts. My partner and I have been playing with ATS for a few years now. We have programmed and back tested about 5 different systems based on some simple principles. The results look great. We’ve back tested back a few decades and have significant out of sample data. We've also written in re-optimizing code which is also very clean and the system adapts to changing markets. I'm trying to do some testing myself on the overall portfolio and unclear how to determine the volatility for a portfolio of ATS's. I have the standard deviation of each system's profits; I am trying to determine the standard deviation of the whole portfolio. Is this as trivial as determining the covariance between each system and then using basic statistics? I'm an actuary and work extensively with variances (though nothing related to trading) and feel like I might be over-thinking the whole thing. I look forward to any input! Thanks Edit/Delete • Quote • Complain
 Martinghoul   Registered: Jan 2009 Posts: 5641 09-11-12 08:54 PM Isn't it just the traditional formula for the calculation of portfolio variance? I mean this: You should be able to find it here: http://en.wikipedia.org/wiki/Modern_portfolio_theory Edit/Delete • Quote • Complain
 hondia   Registered: Sep 2012 Posts: 3 09-11-12 09:19 PM you know, one would think. But i have a feeling it can not be that trivial Now im going to get this 5X5 covariance matrix. Fun! Edit/Delete • Quote • Complain
 2rosy   Registered: May 2012 Posts: 336 09-16-12 02:47 PM there a several R libraries that will give you this info. google R portfolio analysis Edit/Delete • Quote • Complain