Trading Long Zinc, Short Coffee or say Long Industrial Metals index and Short Carbon Emissions index could evoke a shock among the pair trading community, leave aside the simple investor. How can you mix coffee with zinc? “These are pairs, they are not for me, I am a single stock (asset) absolute performance go getter”. Wrong Answer. A simple Dow trade is an investment in the Long Dow – Short Dollar pair as Dow is denominated in dollar. It’s different that you ignore the dollar leg and just look at the Dow leg. But the real returns on your single asset trade have to be netted for dollar performance.
From July 2008 we have been tracking assets against their respective benchmarks in form of pairs. We benchmarked metals against precious metals index, various currencies against dollar, agro assets against a composite agricultural index, and energy assets vs. energy index. We illustrated numeric rankings selling the best and buying the worst, it worked.
We started running a portfolio of agro pairs, forex pairs, metal pairs, energy pairs, and bond pairs all the time realizing that we were actually trading a cross asset portfolio where metals were pegged against agro, agro against energy. It was a mix match of different assets. If we had two running pairs long AIGI (Industrial Metals) vs. short Nickel in one trade and long AIGE (Energy Index) and short heating oil (heat) on the other, we were actually playing Nickel against Energy Index.
Today we integrate our Alpha Global portfolio with the following 55 assets. Forex (EUR USD, AUD USD, GBP USD, CAD USD, JPY USD, CHF USD, Yuan Rnmbi, Indian rupee, NZD USD), Energy (Crude, Natural Gas, Gasoline, Heating Oil, Petroleum, Carbon Emissions, Brent, WTM, Energy Index), Metals (Precious Metals, Tin, Zinc, Nickel, Copper, Platinum, Silver, Industrial Metals Index, Gold), Agro (Coffee, Corn, Grains, Livestock, Sugar, Wheat, Soybeans, Cotton), Thematic and Global Equity (Coal Mining Fund, Shipping Fund, Dow Industrials, Sense, Agricultural Equity, Water, Nuclear, Russell 2000, Russell 1000 USD), Bonds (US 30, US 5Y, US 10Y, US 2Y, INR Bond Index, China Bond Index, Australian Bond Fund, Global Bond Index, Sweden Bond Index).
Now you will see us doing seemingly exotic strategies where we unwind AIGI-Nickel pair at a profit by just closing the Nickel leg and shifting AIGI exposure against short Carbon. It just sounds strange. Markets and assets are connected in time through performance. Time does not differentiate between zinc and coffee. It’s the same inefficient divergent pairs that can be profited from. Lack of cross asset pair tradability is a myth. Get ready for long zinc, short coffee pair. We are expecting a signal on the pair soon.
To read the latest Alpha Global report download it from the links below.
The latest Alpha Global carries pair tracker signals, numeric ranking, numeric ranking changes, performance cycles.
For more information on Alpha Global mail us at support@orpheus.asia
Numeric Ranking Assets
Performance Cycles – Aggregate Assets
Numeric Ranking
Performance Cycles – I
Performance Cycles II
ALPHA is a pair trading, long only – short only strategy and Numeric Ranking product based on TIME fractals. Time arbitrage, Time Triads, Time fractals are terms coined by Orpheus Research. The signals are carried over three different time frames viz. sub minor (2-3 days), minor (10-30 days) and intermediate (above 30 days). This is a daily signal product. The signals will be illustrated through tracker and running portfolios. Alpha can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades. This is a part of the time triads analytics developed by Orpheus Research.
Coverage: Agro, Forex, Metals, Energy
Performance cycles is a term coined by Orpheus Capitals. This is another name for time triads, time arbitrage, time fractals but expressed in terms of relative performance. It’s a bounded oscillator that moves in a range say from 1 to 30. 1 is top relative performance and 30 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick.
*This is a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager to execute these pairs. For more details please subscribe to the ORPHEUS TIME ANALYTICS research products.
Time is a social construct and we see time through the life and nature around us. Understanding time can not only give a unifying theory to research of a few thousand years, but also help us understand the world we live in. Time evolves, oscillates and continues. Time comes before everything, but we don’t see it. We just feel it. We believe what we see and this is why understanding what we don’t see is a challenge. Understanding time could bring more than a conventional thought down, it’s a revolution, which could rock the very foundation of economic thought or the geometric structures Euclid laid down in 300 BC. We are at the start of the journey, but if time is indeed the real mathematics, we could see high accuracy in time forecasts.
Econohistory is the study of performance cycles between assets. Cycles are the generic name for time fractals. Performance cycles can be studied for any time frame, for as small as a tick data to multiyear time frames. This objective approach to performance cyclicality can explain why intermarket analysis is an area of study? Why bonds and commodities tend to be inversely related? What is the connection of Oil with world markets? Why the world watches DOW sometimes and sometimes a 500 point effect on DOW seems to have no impact? Why correlation between assets moves from near perfect at times to weak correlation at other times? Why the same news has different impact on a stock or market? Why equities and bond trend together and why the relationship decouples sometime? When will inflation become deflation, disinflation, stagflation or hyperinflation? When and why does gold outperform and underperform silver? Econohistory can objectively answer these questions, using performance cycles, time fractals and past data. Economic history is mathematical.
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Orpheus Research at Reuters – United Kingdom
Orpheus Research at Reuters – United States
