Questions tagged [longshort]

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41 views

How to build an optimal long-short portfolio?

Assume I have α and β, How to build an optimal long-short portfolio? Can you please give me an example After building that portfolio, what's the expected return?
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20 views

Show the expected return of the portfolio and how to derive return variance of the long-short portfolio?

Show the expected return of the portfolio and how to derive the return variance of the long-short portfolio? (see picture)
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0answers
31 views

Relation between Sharpe ratio and amount of capital

In the book Quantitative trading by Ernest P. Chan, in one of the example we compute the Sharpe ratio of long-short strategy and one step perplexes me: In column L, compute the net returns for ...
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1answer
108 views

What does “Gamma profit/loss” mean?

I understand the Greeks as derivatives, but I'm very confused with terms like "Gamma profit/loss""Theta profit/loss". What do these terminologies mean? I've searched online but can't find a proper ...
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0answers
87 views

Constraints for a Long-Short Mean Variance Objective Function

Problem: I am trying to set up constraints for a long/short mean variance optimization problem. My constraints include: beta neutrality cash neutrality equality constraints on categories: <...
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2answers
656 views

calculate portfolio return with one long position and one short position

I was trying to learn how to work out the performance of a portfolio where you are long one stock and short another. I found an example below. The NAV is calculated by adding the value of the long ...
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2answers
447 views

Calculate asset allocation given “long and short” optimized portfolio weights

If the amount of capital that has to be allocated for each asset given the "long only" optimized portfolio weights is: ...
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1answer
59 views

If by selling short assets, you get extra capital for your longs, can you actually be dollar neutral?

I have a strategy where I short index ETF worth 80% of my portfolio, it shows up in leverage because I've borrowed the asset to short, but now I have 1.8 times the initial capital because of short ...
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2answers
86 views

Understanding Leverage specifically when there is loss [closed]

Leverage helps the trader to trade with more than what is available in the trader's account. Lets say I trade long 10 BTC/USD at 7000 USD using leverage of 1:10 (i.e i deposited 7000 USD). Now if the ...
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1answer
106 views

VaR of long options

I just had a chat with a risk manager who thinks that the daily VaR of a long option with a maturity under three months should be 'Premium of the Option' / 20 (assuming twenty days in a month) ...
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2answers
112 views

EuroStoxx50: long index and short futures

If you look at a cumulative return of a very simple portfolio, consisting of long EuroStoxx50 total return index and short EuroStoxx50 futures, you can see that over the last 10 years this portfolio ...
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2answers
249 views

Standard deviation of a long-short portfolio with net position zero

I've come across the following question and I'm slightly stuck in answering it: Suppose you have a two-stock portfolio that is long one stock of asset A, and short one stock of asset B, with A ...
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2answers
117 views

How to trade the FTSE index long and short

I built a trading model to predict the FTSE index. However, apparently one cannot trade the FTSE directly, but only different underlying products. My model trains on the FTSE index, however tradeable ...
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4answers
496 views

In FX trading, is the risk for long positions higher than for short positions, or vice versa?

Having done FX trading as a hobby for nearly two years now (and having made some profit overall), I now have got a fundamental question which I think I already have the answer to, but I would like to ...
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2answers
738 views

volatilty and Sharpe Ratio of long-short portfolio

What is the proper way to calculate volatility for the long short portfolio? if calculated in a standard way the offsetting positions are driving it down. How about Sharpe Ratio? that has an impact ...
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1answer
638 views

Can the net portfolio's beta be different from the sum of long and short betas of the portfolio?

The way I calculate it is summing up the weighted beta of long and shorts but I saw a table where this wasn't the case so I am wondering if this is not the correct way.
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0answers
474 views

Backtesting Long/Short Market Neutral Z-Score Strategy with Custom Factors and Custom Stock Universe

So I've managed to backtest simple strategies, like MA, RSI and some fundamental ones (P/E ratios etc) but Im stuck at my last strategy. Here is some information: Tools: Excel and Python (also a ...
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0answers
103 views

References about market neutral portfolios that isolate unsystematic risk

I am looking for references, information, backtests etc. about market neutral portfolios that go long the index and short stocks of that index with high unsystematic (idiosyncratic) risk. The idea is ...
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3answers
619 views

market neutral weights and cash values

I am looking at a market neutral portfolio and have a question which I think is probably pretty simple. So I can see the individual stock weights. ...
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2answers
410 views

Forex trading scenarios - calculating units

I'm trying to build an automated forex trading system and I'm trying to understand how to calculate the number of units I should specify for each trade in different scenarios. Say for example I have ...
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1answer
548 views

Calculation of Returns and Risk Metrics for L/S Portfolio

I am trying to build a test for a long/short portfolio. I am aiming for market neutral and have put together a long portfolio as well as a short portfolio (see below). However, I am not sure if I am ...
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2answers
1k views

Long/Short Backtesting Set up

I am going to be backtesting a Long/Short equity strategy and need some guidance on how best to deal with the short book. I was thinking that for each portfolio I would go long 50 equities and go ...
2
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1answer
118 views

Calculating short/long order percentages?

I have a feed in real time that lists the ask and bid orders. Each order consists of a value and a quantity. I want to calculate the percentage of short orders from the total orders in terms of ...
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1answer
239 views

Replicating the short part of a long-short trade using inverse ETFs

I devised a pair trading strategy going long XXX and short B*YYY. B is the quantity of shares of YYY I need to short. The problem is I can’t go short on YYY, but there is an inverse ETF for YYY ...
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2answers
993 views

Why does Futures contract credit and debit a position daily, if it has “locked” the price?

I thought I had understood futures contract. But it seems the daily settlements betray my understanding. Futures contract provides price & product safety to involved two parties. E.g. Wheat ...
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0answers
375 views

pairs trading or long short strategy given volatility of the stocks

Suppose I have 2 stocks and the only thing I know about them is their volatility and that they cointegrate. Let's say vol of stock A is 25% and B is 20%. Will I be able to find a hedge ratio only ...
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1k views

Long/Short portfolio return

Suppose I have a Po with one long, one short positions and some cash (to balance the short + 50% margin) as shown below: ...