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Investment Approach

  • Daily buy/sell calculations made without the emotional pitfalls of decision-making under pressure.
  • Active human oversight closely monitors investment performance, and implements periodic re-optimization.
  • Sophisticated risk-management techniques keep the system at peak performance.

Our systems are designed to forecast near-term directional movements for broad equity indices, which we trade long and short. We are not stock pickers. We are not market neutral.

The first quant investors were CTAs (Commodity Trading Advisors) from the managed futures industry. CTAs typically use trend-following or mean-reversion strategies. Alpha Plus Advisors is not a CTA. Our approach is based on sophisticated statistical analysis run by complex computer algorithms. Our strategies are sometimes placed in the category of "statistical arbitrage" – though the label can be misleading. While we do use statistics, there is no arbitrage involved.

   

Q-TradeTM Investment Strategy

Daily buy/sell decisions are determined by Q-trade, our proprietary trading system designed to interpret the mass psychology of the stock market. It is based on a multifactor non-linear regression model that uses 26 market indicators. A unique and original feature of the model, developed by Alpha Plus Advisors, is the use of programming logic in the regression equations to turn the indicators off and on. On any given day, approximately half of the indicators are in use. Statistical techniques determine the relative importance of each indicator, as well as how the indicators interact with each other.

Market indicators are based on price, volume, seasonality, sentiment, breadth, sector laggards & leaders, technical trends & patterns, and factors from other financial markets (such as commodities, currencies, fixed income and foreign markets). The objective is to capture short-term market trends of approximately 1-week duration in the Nasdaq 100 Index and Russell 2000 Index. Buy and sell signals are used in conjunction with index funds from the ProFunds and Rydex family of mutual funds (www.profunds.com & www.rydexfunds.com). Examples of specific market indicators are discussed in our white papers.

 

Sector Rotation Investment Strategy

Performance attribution studies by academics and professional investors have identified that sector selection is more important than individual stock selection for short- to intermediate-term investment returns.

The following sectors are used in our long/short Sector Rotation system: Basic Materials, Consumer Discretionary, Consumer Staples, Energy, Financials, Healthcare, Industrials, Information Technology, Telecom Services, and Utilities. The strategy is implemented using sector index funds and ETFs. The system is continually updated with new market data, but decision making is fully automated without subjective input from an investment manager. Investment allocation is based on yearly seasonal patterns combined with long-term economic and interest-rate cycles. The Q-Trading and Sector Rotation systems have historically shown attractive correlation characteristics and are therefore complementary from a risk/return perspective.

Money Roll MetricsTM Investment Strategy

The newest addition to our family of investment strategies is a trend-following system for an index of small-cap and microcap stocks. A white paper discussing key macroeconomic factors vis-à-vis the microcap index is available for download. Also included in the file is a description of the Money Roll Metrics strategy.

 

 

Alpha Plus Advisors, LLC