Archive for the ‘Ideas’ category

Long zinc, short coffee delivers 9% (7 days)

Despite starting counterparty odds, long zinc -  short coffee was up 9% and long AIGI (industrial metals) - short gold was up 14%. This week we are doing another pair rollover. We are closing the short heating oil leg and plugging the long AIGE (Energy Index) leg with Natural Gas. The Natgas Rieki is turning against dollar and also against Brent and AIGE. Our global asset rankings are benchmarked to dollar, so as natural gas moves up to top three, we don’t want to hold it as a naked asset anymore.

Alpha Pair Tracker

The other running pairs like short carbon emissions ETF and Crude, Short Carbon Emission and AIGI (industrial metals) delivered 1.6% and 8% since 15 July respectively. Long Euro – Short dollar is up 16% and still running. GBP USD and JPY gave first signals of exhaustion against dollar.

During an internal brainstorming session, the question which emerged was “Why should be just look at extreme divergence to short the best and long the worst?” and “Why can’t we say keeps the low divergence pair running, say between wheat and grains (No. 4 and 10)?”

The whole idea of playing extreme divergence is about accepting that one can try understanding that assets have diverged more than normal and the path of least resistance is to low or neutral divergence when for example coffee and zinc reduce the gap from worst and best to somewhere mid way. Working with low divergence pairs or non extreme pairs is like guessing how a backwardation will resolve, very tough.

On a final note, our top ranking coffee was number 2 this week. Sugar assumed the top ranking spot. What a better time to talk about sugar but now. Sugar was in the news and the majority is made to believe that there is no asset better than sugar today. For us at Orpheus, Sugar should not only underperform dollar, but also more than a few global assets over the next few weeks. The latest Alpha carries the pair tracker with updated signals and global asset rankings.

Numeric Ranking

Strategy Update

Sector Cycles

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: 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).

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




Is time two or three dimensional?
Growth vs. Value
Head vs Shoulder
Sunspot and TIME
What is a PAIR?
Tossing the TIME coin
Inflating the Deflationist?
(D) Decision making and TIME  - 17 JULY
Environment and TIME
Open source and TIME
Time Arb vs Stat Arb
Correlations vs Cycles
Cycles vs Inefficiency
The power law in the Fibonacci sequence
Time vs APM
Avogadro number
Patterns in Irrational numbers
The magic of Euler’s number
The butterfly effect myth
The econophysics myth
Short History, Long Time
What is Randomness?
Explaining the 13 Elliott Patters with Time Triads
How can TIME TRIADS explain inflation? History of inflation
How can TIME TRIADS explain interest rates? History of interest rates
The time exponent
Why is nature exponential?
What is Time Indexing?
Introducing time oscillators
What did Robert  Shiller miss in his revolutionary American Review 1981 paper?
Long PE - Short Price and vice versa
Hedge Inefficiency
Pair ineffciency
value and growth across time
Redifining valu and growth
Statistics and TIME
Beta Cycles
Simplifying Fractals - MSET and TIME
What I learnt from Peter? Entrepreneurism and TIME