Innovations in Trend Following
Trend following strategies aim to provide positive returns on average and meaningful outperformance during traditional market drawdowns.
Two potential ways to enhance a traditional price-based trend strategy:
- Trend following in alternative assets: following price-based trends in harder to access, less liquid alternative assets.
- Trend following on economic data: following trends in economic fundamentals.
Combining Economic Trend Following with Price Trend Following
Different styles of trend following are diversifying to one another and can provide strong potential benefits when combined in a diversified trend portfolio.
While economic trend is a close relative of price trend-following, both approaches aim to capitalize on the tendency of markets to systematically under-react to news. Combining the two helps capture the underreaction phenomenon, potentially leading to improved risk-adjusted performance and more robust drawdown protection.
Trend Following in Alternative Markets
We summarize what a trend following approach is, how it can be applied to alternative markets, and why alternative trend following approaches have historically outperformed during difficult periods for traditional asset classes.
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There can be no assurance that any investment strategy will be successful.
There can be no assurance that any investment strategy will be successful.
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