ULTRA Financial Systems

Reduce your Account Volatility with a
Diversified Strategy (02/11/03)

HOW TO MODEL A MULTI-STRATEGY PORTFOLIO

The ULTRA Menu item Timing/Historical Analysis (Portfolio) allows you to model a combination of strategies each trading different vehicles.

Note: This functionality is brand new and still considered in beta testing. We do plan to add additional functionality to this concept.

For example: Assume you are trading portfolio using four different composite strategies that are defined by the files:

C_SP500.txt
C_NDX.txt
C_BOND.txt
C_GOLD.txt

(These are just examples. Your actual composite definition files can have have other names. Long filenames are not supported.)

Assume that you want the strategies to control the following percentages of your portfolio:

C_SP500 => 50%
C_NDX => 20%
C_BOND => 20%
C_GOLD =>10%
TOTAL => 100%

Here are the steps to model this portfolio:

Run a Timing/Historical Analysis (Composite) for each of C_SP500.txt, C_NDX.txt, C_BOND.txt, and C_GOLD.txt on the widest possible range of dates creating the equity files: C_SP500.eqt, C_NDX.eqt, C_BOND.eqt, and C_GOLD.eqt. Be sure to click the "Create .eqt files..." check box in the dialog box that controls the analysis.
Create a "Portfolio Definition File" (PDF) that describes how much of the portfolio each composite strategy's .eqt file controls, by selecting ULTRA's File/New and typing the lines: C_SP500.eqt,50.0 C_NDX.eqt,20.0 C_BOND.eqt,20.0 C_GOLD.eqt,10.0 Save the file under the name, P_TEST.TXT. Note: The sum of the percentages must be 100%.
Run Timing/Historical Analysis (Portfolio) and select the PDF you created named P_TEST.TXT and click on OK. The program will do some computation and then the regular Historical Analysis Dialog box will be displayed where you can modify the Start and End Dates. The earliest possible start date will be displayed in the Start Date field. The rest of the fields in this box are not relevant. Since all the buy/sell signals are represented in the various .eqt files, the analysis will basically buy and hold the combinations of .eqt files in the percentages you specify in the PDF file.

When the analysis is complete, the results file will be displayed. In this case the results are stored in the file P_TEST.DMP.

This testing functionality will be important in the future of ULTRA. We plan on doing a lot of work on the Bond systems. The Gold systems have been performing well. Future classes of systems could include a variety of possiblities such as internationals. Obviously, the goal of this functionality is to allow the investor to test a combination of a set of strategies that are not only diversified in the analysis type, but also in the assets they trade.

ULTRA Financial Systems Inc.
P.O. Box 3938, Breckenridge CO 80424
Phone: 970-453-4956 Fax: 970-453-2467