The Methodology

Sentiment Enhanced Signals (SES) optimizes the equity portfolio composition using a powerful optimization model known as Second Order Stochastic Dominance (SSD). SSD approach is hailed as a 'game changer' in asset allocation and portfolio construction

OPTIMIZED PORTFOLIO:

Based on our extensive research in an academic setting followed by many tests in back testing, virtual trading and live trading the methodology of SSD has emerged as a leading method of asset allocation with 'down-side risk control'. SSD solves the asset allocation problem by constructing a portfolio that dominates a given reference distribution , that is, the distribution of a benchmark portfolio. In our case, the benchmark is set to be one of the major market indices. By focusing on the minimization of downside risk in asset allocation, a combination of assets is formed to produce the optimal portfolio that achieves the highest returns. Read more about the optimization model here.

MONITORED MARKET SENTIMENT:

In the asset allocation process, in addition to market data other data feeds are considered; these include news sentiment and macro sentiment data. These add value to the strategy by enhancing the prediction of market regimes and provide an indication of surprise market shocks.

RISK TOLERANCE:

The portfolio can be customized according to a client's risk tolerance in a dynamic setting. This is achieved through a process called money management. By stating your risk preference, we are able to adjust the proportion of investment split between risky and risk free assets.

TRADE SET UP:

Trading signals are automatically generated on a daily basis with a daily snapshot of adjusted daily closing prices being fed into the model. The execution of the model leads to trading signals which comprise information on WHICH stocks to buy and HOW MUCH stocks to buy. Trades are set up for execution 30 minutes before the market closes for the day.

About Trade SES

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The platform displays performance results

• For up to 10 years of back testing
• For trading in live markets today
• For global markets such as USA, UK, Europe, India, Hong Kong and Japan
• Adjusted for risk tolerance (defined by money management percentage)
• Broken down between long and short positions

Display features include

• Graphical plots of portfolio performance, portfolio cardinality and proportions of long and short positions
• Performance tables showing measures of return, risk, Sharpe ratio, Sortino ratio, draw downs, days to recovery and turnover
• Detailed daily trade tables and mark-to-market tables outlining the exact composition of the chosen portfolio
• Pie charts and Bar charts give a breakdown of the daily composition of the portfolio