1. What is quantitative hedging strategy?
It refers to the use of quantitative means to hedge risks in order to obtain annualized expected returns beyond expectations independent of the stock market trend. In China hedge fund market, the common quantitative hedging strategies include long and short stocks, market neutrality, arbitrage and managed futures.
2. Stock long/short strategy
This is a strategy for both long and short stocks. In order to obtain certain expected annualized expected returns, the long-short strategy is generally carried out in the form of paired transactions. Pairing transaction is based on the historical correlation coefficient of stocks. Once the correlation coefficient deviates from a certain range due to the fluctuation of stock price in the matching group, you can make a profit by buying low-priced stocks and shorting high-priced stocks. The adoption of stock long-short strategy needs to use mathematical statistics technology to model a large number of historical data of stocks and use the model to monitor the correlation between paired stocks in real time.
3. Market neutrality strategy
Is to build a portfolio, so that the correlation coefficient between the portfolio and the market is 0, that is, the portfolio does not fluctuate with the fluctuation of the market.
Neutral strategy can be divided into market value neutrality, industry neutrality and beta neutrality according to the means of realization. Beta neutrality means that the beta value of the portfolio is 0. Market value neutrality refers to the fact that the proportion of large, medium and small-cap stocks in the portfolio is consistent with the proportion of short index, so it is not necessarily possible to achieve beta neutrality to achieve market value neutrality. For example, bulls choose a basket of GEM stocks, and bears hedge with the Shanghai and Shenzhen 300 stock index futures with the same market value. Obviously, short positions cannot cover all the exposure of long positions. Industry neutrality means that bulls and bears are in the same configuration and there is no bias. Generally speaking, the combination of market value neutrality and industry neutrality can be approximately considered as reaching beta neutrality.
4. Arbitrage strategy
It refers to the investment strategy of using the double pricing of the same asset in different markets or at different times to buy low and sell high in order to obtain the difference. The basic assets that can be used for arbitrage include financial indexes, commodities, funds, options and foreign exchange. The common sub-strategies of arbitrage strategy include periodic arbitrage, intertemporal arbitrage, graded fund arbitrage and ETF fund arbitrage.
Spot arbitrage is a strategy of trading futures and spot spreads to obtain expected annualized expected returns. Stock index futures arbitrage is commonly used. Because the futures price will converge to the spot price on the delivery date, once there is a tradable spread, the expected annualized expected return can be obtained by opening the position.
Intertemporal arbitrage is the behavior of fluctuating arbitrage by using the price difference between contract prices of the same futures product in different months. Theoretically, the price difference between the far-month contract and the near-month contract should be the holding cost between the far-month and the near-month. Once the spread is beyond a reasonable range, arbitrage opportunities will appear.
Graded fund arbitrage and ETF arbitrage both use fund arbitrage. Hierarchical fund arbitrage is a strategy to profit from the difference between the net value of the parent fund and the transaction price of A and B grades. ETF arbitrage is a strategy to profit from the net value of ETF, that is, the difference between the price of a basket of constituent stocks and the transaction price in the market.
Because the essence of arbitrage opportunities is caused by market failure, such opportunities are fleeting. Therefore, it is usually necessary to use programmed trading to monitor the arbitrage opportunities in the whole market in real time and open positions in the fastest time.
5.CTA strategy
That is, management futures strategy can also be divided into non-quantitative trading and quantitative trading. Non-quantitative management futures strategy relies on fundamental analysis and technical analysis to subjectively long or short futures targets.
Quantitative CTA strategy is mainly trend tracking strategy. Similar to the stock multi-factor model, the trend tracking strategy also uses the quantitative model to analyze the historical data of futures, and obtains the trend indicators to judge the trend of the underlying assets. Once the trend signal is found, start trading immediately. CTA strategy also generally adopts programmatic trading.