Omega Point Blog

Volatility

Building a Smarter Tech Hedge

November 03, 2019

Over the past couple of weeks, we’ve discussed the benefits of using a smarter hedge basket vs. the standard and ubiquitous ETF hedges that most portfolio managers use to some extent. Most recently, we built a higher Volatility basket out of the SPY constituents, through which a manager could have made an incremental +5.68% return per year over the traditional SPY hedge.

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Omer Cedar
Omer Cedar

Building a Superior SPY Hedge

October 27, 2019

Last week, we discussed the significant drawbacks of using the S&P 500 SPDR (SPY) as a market exposure hedge. We established that 1) the SPY hedge is wildly common among the institutional investment community (40% of the SPY’s AUM is short interest), and 2) it carries an inherent long bet on Volatility - a negative premia factor that’s down 32% over the past five years.

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Omer Cedar
Omer Cedar

The Inherent Volatility of a SPY Hedge

October 20, 2019

This week we’ll be kicking off a series on “smart hedging,” by which we aim to find a more efficient and elegant solution to hedging market exposure in your portfolio. We’ll also provide our weekly market and factor update.

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Omer Cedar
Omer Cedar

What's Driving Volatility & Beta?

April 07, 2019
In light of the substantial rally in the US market over the past week, we'll be refocusing our attention on our US model in order to see how the key Volatility and Market Sensitivity factors have behaved. We'll also attempt to identify what's been driving these factors by decomposing their underlying long and short components.
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Omer Cedar
Omer Cedar

Comparing Factor Performance in a Global vs. US Model

March 03, 2019
Typically, the factor trends that we observe in Factor Spotlight are based on our US model. This week, we'll be introducing our worldwide model by taking a look at how some of the major factors have behaved on the global level, compared to what we're seeing in the US.
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Omer Cedar
Omer Cedar

Offensive Recovery Finale — The Model Portfolio

February 24, 2019
Following up on last week's discussion, we conclude our multi-part series on positioning for a potential market recovery, by building and analyzing a model portfolio that internalizes the insights we've gained from prior recoveries. Through the construction of a model portfolio we've uncovered an intuitive insight applicable to the recent recovery so please make sure to read the section...
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Omer Cedar
Omer Cedar

Contemplating a Recovery: adding the idiosyncratic volatility factor to the mix

February 17, 2019

I hope today's post finds you well and you are enjoying your Presidents' Day weekend. In last week’s Factor Spotlight, we sought to associate changes in fundamental factors—growth and profitability—with net momentum, and found that 77% of the time growth and profitability moved in the same direction, so did net momentum. 

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Omer Cedar
Omer Cedar

Where's the Ceiling for volatility & Beta?

January 27, 2019
Never a dull week, even with the market taking a day off on Monday. With Volatility and Market Sensitivity both at “Extremely Overbought” levels, we'll take another look at these factors in a historical context to better understand where they are in relation to the market recoveries of 2009 and 2016. US Market In an abbreviated week, uncertainty from the government shutdown...
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Omer Cedar
Omer Cedar

Profitability Lags While Beta & Volatility See Continued Strength

January 20, 2019

This week saw strong market performance amid a cascade of political and economic headlines. Here's an update on the factor story that we continue to find of most vital importance - the interplay between Volatility, Market Sensitivity, and Profitability as it relates to a sustained market recovery.US Market 

 

Our US Market factor (99% correlated to the S&P 500) continued its upwards...

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Omer Cedar
Omer Cedar

Volatility & Beta Up Big While Profitability Slowly Recovers

January 13, 2019

This week brought with it some mixed news, between the potential jobs impact stemming from the government shutdown, increased optimism over US-China trade, and recent comments from the Fed about the need for “patience”. With regard to factors, we're seeing signals that indicate that we're in the midst of a return to a “risk-on” environment, with Volatility and Market Sensitivity both...

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Omer Cedar
Omer Cedar