Combining Strategies to Create a Complete Portfolio

Todays stock trading question comes from Mike N. whose question is “What kinds of strategies can be combined?”

Combining strategies is a great idea if you have enough capital. Not all strategies will work all of the time, but by combining several strategies you can gain synergies and diversification which in turn can lead to smoother equity growth.

Ideally the strategies you want to combine should be uncorrelated. Sometimes this is more difficult to achieve because in certain market environments, such as major price shock events, many normally non-correlated instruments move together. One should also be cognizant of the expense and management of running many strategies in highly diverse markets. Commodity based strategies for example introduce very different risks and challenges than, say, basic equities systems.

In simple terms, and not necessarily completely non-correlated, one could run a longer term trend following strategy and a short term mean reversion strategy. Even more ideally these should be run in different markets, i.e. trend following in Australia and mean reversion in the US as an example.

Combining The Chartist’s Growth Portfolio or All Weather systems and US High Frequency Strategy may work for you. Trish and I previously used the Growth Portfolio to manage our SMSF and trade the US High Frequency Strategy (within The Chartist US membership) outside our super fund. Take a 2-week trial and see if The Chartist/s strategies are right for you.