You can pick a single strategy from HAL’s catalog, and stick to it. But combining strategies is a great way to spread your allocations on different trading typologies, which can reduce risk. The Pulse: ETH and Artificial Intelligence (AI) Pick could be a good starting pair – let’s discover why.
You Can Find it All on HAL
HAL opens up access to a great variety of strategies: medium-term, trend-following strategies (Wise), long-short tracking strategies (Pulse), meta strategies with a focus on volatility control (Dynamic) and artificial intelligence-powered strategies (Artificial Intelligence (AI) Pick).
The table below sums up what sets the strategies appart. Some have a large variety of underlying assets to trade on (10 for Wise), while others trade on blue-chip coins. The exposure can vary from mono-underlying, where the strategy is only betting on a single coin (for example, ETH for Pulse: ETH) to multi-underlying (4 coins for Dynamic). Frequency ranges from hourly to daily, and signals can either be long-neutral or long/short. Finally, volatility can be highly correlated with the underlying asset or controlled by the algorithm.
All quite different… and very complementary! The power of HAL really shines when you combine strategies – something that only takes a few clicks on the platform. But which strategies should you pick to work in tandem? We might have given it away already…
Focus on Pulse: ETH and Artificial Intelligence (AI) Pick
Pulse: ETH is an hourly strategy which provides a continuous signal between -1 (100% of the allocation on a short position) and 1 (100% of the allocation on a long position). It actually combines two signals:
- A trend-following signal that can only take long values (0 to 1) to catch medium-term uptrends
- A signal that can go either long or short (-1 to 1) to catch short-terms trends on both the upside and downside.
On the other hand, Artificial Intelligence (AI) Pick relies on an artificial intelligence algorithm to predict (and apply to exchanges) the top-3 performers for the coming 24 hours, among 9 HAL strategies on ETH and BTC. Depending on the strategies it selected, its signal can range from -1 to 1.
The table below shows their relative differences.
Why ETH: Pulse and Artificial Intelligence (AI) Pick are Complementary
We have seen that the two strategies take contrasted approaches when it comes to trading: their ways of trading should be equally contrasted. We can check this by studying their correlation, that is to say the degree to which they move in relation to each other. A correlation of 1 means that two assets move in the exact same direction, and -1 that they are polar opposites.
The graph above shows the 30-day correlation between Pulse: ETH and Artificial Intelligence (AI) Pick over the last 12 months. It means Artificial Intelligence (AI) Pick and Pulse: ETH can be decorrelated in some periods: an investor could therefore select both to diversify his portfolio with decorrelated strategies in the medium term.
Why does it matter? Decorrelation is a possible way to mitigate risk in the medium-term: if one strategy is not doing well because of underlying market conditions, the other strategy can make up for it. In this example, periods of decorrelation between Artificial Intelligence (AI) Pick and Pulse: ETH signify that the two strategies behaved & traded in contrasting ways, hedging the risk of users who selected both in their portfolio.
Here’s where things get even more interesting. The table below shows that although the two strategies were often decorrelated, they both performed well over the last 12 month (+33.42% for Pulse: ETH and +27.58% for Artificial Intelligence (AI) Pick), and outperformed their underlying assets. They also had lower volatility and maximum drawdown, and hence a better Sharpe ratio: their return/risk balance is superior.
Conclusion
By allocating funds to several strategies, if possible poorly correlated or anti-correlated, HAL users can hedge their risk by trading on multiple kinds of strategies, exposing their allocations in different ways of trading. This is the case of AI Pick and Pulse: ETH, which both achieved great results in the period covered above, while being decorrelated in their mechanism.
We have highlighted a first duo, but each trader can design his or her own diversification strategy thanks to the data points provided for HAL strategies.
What’s best: getting strategies up and running on HAL only requires a few clicks. Get started today.
Disclaimer:
Investing involves risk, including the possible loss of all the money you invest. In particular, crypto-assets are a highly volatile and speculative asset class. HAL is only suitable for traders who are willing to bear the risk of loss and experience sharp drawdowns. Past performance is not necessarily a guide to future performance. The performances presented are real performances calculated net of execution fees and slippage from a proprietary Binance account.
The purpose of this material is to provide objective, educational and interesting commentary and analysis on developments in the crypto-assets sector. Nothing in this material should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group where it may be illegal to do so. Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto.