The Holy Grail: Uncorrelated Strategies

Combining uncorrelated strategies for a smooth pnl curve

You often hear “There is no free lunch” or “No such thing as a holy grail” and other similar things when people talk about financial markets.

When people do talk about a holy grail though then they usually talk about the same thing: diversification.

The less correlated or even negatively correlated your strategies are the better the diversification effect usually is.
A mean reverting strategy is gonna be better for diversification if you already run a momentum strategy for example.

Besides diversifying across strategies you can also often diversify across instruments, running the same momentum strategy on different coins for example.
This obviously doesn’t work if it’s an asset specific strategy though.

In this article we are gonna present a few different uncorrelated strategies and look at their individual and combined performance.

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Table of Content

1. Asset Universe

2. Scaled Momentum

3. Mean Reversion

4. Seasonalities

5. Combined Performance

6. Final Remarks