Recently, there was discussion around what settings to use in the Main Menu when the Top Rank Only setting is adjusted between Yes and No. Knowing that a recent market high was reached on September 20th of 2018, I decided to take the Aristotle, a Dual Momentum portfolio, and run tests to see when the switch from equities to bonds was triggered.
Here is the setup. Top Rank Only is set to Yes and the Score Rank Weightings are set as follows:
- Momentum = 40%
- Projection-Convolution = 20%
- Short Term H-A = 30%
- Long Term H-A = 10%
With these settings, the Kipling shifted asset classes from SPTM to SCHO on 10/19/2018 or about one month after the market set a high.
In the second setup, Top Rank Only is set to No. The Score Rank Weightings are set as follows:
- Momentum = 10%
- Projection-Convolution = 30%
- Short Term H-A = 40%
- Long Term H-A = 20%
With these settings, the Kipling picked up the shift from equities to bonds on 10/2/2018 or 17 calendar days before the settings that accompany the Top Rank Only setting of Yes. One sunny day does not a summer make and one brief test is insufficient to draw any major conclusions. The results match what settings HedgeHunter is using for portfolios with fewer holdings.