BullPen

A Long Active US Equity Strategy driven by Machine Learning

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Market Outperformance

 

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Layered Quantitative Research

 

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Machine-Learning & Genetic Algorithms

 

What is BullPen?

Bullpen is an active multi-factor model driven by machine learning. It is designed to outperform the market from both absolute and risk-adjusted perspectives. Allocations can move to cash during heavy market uncertainty.

Long Only

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Full Report

The above backtest represents quantitative research and should not be considered as investment advice, or solicitation to buy or sell securities.

Lucena Research is a technology company and everything presented here is derived from quantitative research. The information above is intended for certified investment professionals who understand the inherit risk of investing. It should not be assumed that the above backtest results will be repeatable in the future. Detailed list of securities and the factors used for their selection criteria is available upon request.

Possible application with Hedging by Cash Neutral Shorting 50% with SPY.

Backtest of a Cash Balanced Hedge by Shorting SPY

Bullpen Image

The above backtest represents quantitative research and should not be considered as investment advice, or solicitation to buy or sell securities.

Lucena Research is a technology company and everything presented here is derived from quantitative research. The information above is intended for certified investment professionals who understand the inherit risk of investing. It should not be assumed that the above backtest results will be repeatable in the future. Detailed list of securities and the factors used for their selection criteria is available upon request.

BullPen Goals:

  • Market outperformance – absolute and risk adjusted.

Our Edge:

  • Utilizes a layered portfolio construction process: Quantitative research utilizing genetic algorithms and proprietary event scans.
  • Multi-factor models of technical and fundamental factors

How do we pick constituents?

  • Genetic algorithm constructs multi-factor model out of 500+ indicators
  • Scan based event study technology identifies stocks that meet multi-factor model algorithm
  • Stock basket ranked by machine-learning based forecasting

Execution

  • Positions are held for one month (twenty trading days) or until exit conditions are met.
  • Positions are accumulated gradually as studies allow to avoid specific sudden even risk – one new position per day.
  • Entry and exits are executed through market, Volume-weighted-average-price (VWAP) and Market-on-close (MOC) orders.
  • All open positions are controlled by order-cancels-order (OCO) exit conditions, trailing stop loss and target gains.

Strengths

  • Proven alpha discovery methodology
  • Active and agile, with timely responses to changes in market sentiment
  • Machine learning optimized for maximum return/minimum volatility
  • Gradual changes to portfolio

Risks:

  • Exogenous risk or black swan event affecting equity markets
  • Stock-specific liquidity risk causing gaps beyond stop loss
  • Protracted downtrend equity environment

Risk Mitigation:

  • Enforce maximum position size per equity = <10% per Equity
  • Only add 5% to portfolio per day
  • Stop Loss (GTC) placed on every open position @20%
  • Max Gain (GTC) placed on every open position @16%
  • Scans incorporate bullish macro and market condition factors to avoid signals during negative environments
  • Enforce correlation limits so that holdings are well diversified
  • Entry via VWAP during active trading hours to provide acceptable depth for trades
  • Early exits, or under allocation proceeds are held in cash until next reinvestment cycle
  • Exit at close (MOC) reduces slippage and adds liquidity
  • Deep discount brokerage mitigates drag of high-turnover

Disclaimer: This information has been prepared by Lucena Research Inc. and is intended for informational purposes only. This information should not be construed as investment, legal and/or tax advice. Additionally, this content is not intended as an offer to sell or a solicitation of any investment product or service. Do not take the opinions expressed explicitly or implicitly in this communication as investment advice. The opinions expressed are based on statistical forecasting which is based on historical data analysis. Past performance does not guarantee future success. In addition, the assumptions and the historical data based on which an opinion is made could be faulty. All results and analyses expressed are hypothetical and are NOT guaranteed. All Trading involves substantial risk. Leverage Trading has large potential reward but also large potential risk. Never trade with money you cannot afford to lose. If you are neither a registered nor a certified investment professional this information is not intended for you. Please consult a registered or a certified investment advisor before risking any capital.