The following is a presentation of the trading strategy I have developed based on the correlation between movements in the Credit markets as evidenced by changes in the prices of Credit Default Swaps (CDS’s) and the Equity markets. The Strategy focuses on individual names with all positions taken in the cash equity markets. Movements in the CDS market are the primary indicator of whether to be long or short a company’s stock. An uncompromising risk management algorithm assists in cutting losses and taking profits.
The results are presented here in a series of tables and graphs illustrating the Strategy’s risk/return characteristics. There is data on the Strategy’s returns and the variation of those returns on a Daily, Monthly and Annual basis as well as a number of rolling periods.
It is hoped that the variety of ways in which the data is presented will accommodate the reviewer’s format preference. This being said, any additional information necessary to fully understand the Strategy and/or the risks and rewards of implementing it, can easily be provided. Additionally, all comments and questions are welcomed.
There are two sections to this presentation. The first section presents return information from live trading of the CEC Strategy which began on January 9th of 2008. To the extent that this amount of data may not be sufficient to give the reader an idea how the Strategy performs across a wide variety of market conditions pro-forma results are included in Appendix A. There is a complete explanation of how the pro-forma results were constructed at the beginning of Appendix A.
Thank you in advance for taking the time to review the following presentation.