Alpha India – Reading the signals

Alpha is designed from price performance. This is why all signals whether they come from numeric ranking, numeric ranking changes, performance cycles, strategy update should converge and not diverge. Executing the signals for passive investments should be easier than on active derivatives strategies. However, using mini Nifty futures, Nifty bees or spot stocks as one of the trading legs could reduce overall strategy risk. There are of course chances that a certain performance cycle may not work (not deliver anticipated profit), but this is more owing to intermediate cycles (multi week and higher), which may take time to turn.

Short Tisco – long Sterlite moved against us during the week and turned back. Now it is running at a marginal loss. We continue to run the pair expecting Tisco to underperform Sterlite. Other running pairs are Long Maruti – short M&M. We have a fresh signal in the case of Tata Motors. The long Nifty – short Tata Motors pair started on 2 Feb and has delivered gains over 3% so far. Other running pairs are HDFC Bank – ICICI Bank, Bhel-Acc, Sbi – Hdfc. We have closed the Dlf – Nifty, Bhel – Nifty and Acc – Nifty pairs at a profit. ACC, DLF have reached the top of the numeric rankings and confirms the action. Grasim  pushed higher to the top of the NR list and is the top potential underperformer stock for the weeks ahead, followed by the Hdbk and Itc. Sterlite, Icbk and M&M remain the top three potential outperformers.

The latest Alpha India carries numeric rankings, ranking changes, strategy update, long only – short only signals and pairs tracker.

Numeric Ranking

Performance Cycles – I

Strategy Update

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.

TIME ARBITRAGE portfolio has 18 pairs CNXIT-NIFTY, RELIANCE-NIFTY, TCS-NIFTY, ONGC-NIFTY, INFOSYS-CNXIT, ONGC-RELIANCE, HDBK-ICBK, BHEL-ACC, GRAS-LNT, HLL-ITC, SBI-HDFC, NIFTY-STERLITE, NIFTY-HDBK, SBI-NIFTY, BHEL-NIFTY, NIFTY-ACC, TCS-CNXIT and SBI-HDBK. Minor degree averaged 10-30 days and intermediate degree trade averages above 30 days. The legs should be risk weighted before any implementation. We are assuming a running stop loss of 4% per traded pair. CNXIT/INFOSYS +A-B means LONG CNXIT, SHORT INFOSYS. While CNXIT/INFOSYS –A+B means SHORT CNXIT, LONG INFOSYS.

LONG ONLY, SHORT ONLY portfolio covers NIFTY, CNXIT, NSEBANK, RELIANCE, INFOSYS, ONGC, CIPLA, ICICI BANK, HDFC BANK, TISCO, BHEL, ACC, GRASIM, L&T, HLL, ITC, SBI, HDFC, STERLITE

STOP LOSS AND EXITS are activated at 4%

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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