We constructed a Chinese trade sensitivity factor and examined how it responds to developments in the evolving US-China trade dispute.
The authors provide an overview of the Two Sigma Factor Lens, designed for analyzing multi-asset portfolios and derived from returns of broad, liquid asset class proxy indexes.
Momentum has been a consistent component of CTAs since 2004, but its influence on CTA performance remains lower than it once was. This highlights the potential importance of measuring both manager-specific and overall portfolio exposures in risk terms.
Just four factors collectively explain an outsized fraction of the SG CTA Index’s current risk, while elevated long equity and bond exposures may compromise the amount of diversification CTAs now offer.
The Information Age has transformed and brought spectacular advances to a wide range of industries, from medicine to transportation and beyond. Investment management has been by some measures slower to evolve, but it, too, is changing.
Seemingly subtle differences in the precise definition and construction of a risk factor can create meaningful divergences in its performance.