Three property have been chosen as representatives of diversified exposures:
- SPY (S&P 500 ETF)
- QQQ (Nasdaq 100 ETF)
- AAPL (Apple Inc.)
Day by day adjusted shut costs have been collected, and log-returns have been computed. The next strategies have been carried out:
- Kelly Criterion:
Allocates weights based mostly on the inverse covariance matrix of log returns and their anticipated imply:
This method maximizes geometric development however doesn’t account for short-term volatility.
2. Fractional Kelly:
To mitigate the volatility and overfitting threat of full Kelly, we simulate a 50% scaled model — a typical follow in hedge fund threat administration.
3. Imply-Variance Optimization:
Traditional Markowitz framework, fixing for the portfolio that maximizes the Sharpe ratio below long-only constraints.
4. Equal Weight:
A naive however strong benchmark, allocating equally throughout all property.
