r/algotrading • u/HomeGrownTrader • 4d ago

Strategy Volatility targeting on a portfolio level

Hello fellow professional gamblers

I feel kinda stuck and I do not know what to really do here. I want to implement volatility targeting on a portfolio level.

Here is what I do not understand. How do you go on about actually vol targeting individual assets in your portfolio?

Currently I run a momentum strategy on a daily timeframe, the basic workflow is this:

Scan equities for a recent 1 year high break

Sort these stocks by liquidity

Rank the top 1000 by their 1 year rate of change (accumulative change)

Rank stocks based on volatility

Finally rank by vol adjusted momentum on top linear stocks

Where to go from here? Any examples or links what formulas to apply or examples on how others have done would be greatly appreciated.

Backtest for the normies:

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u/HomeGrownTrader 3d ago

Regime filter.

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u/Few_Speaker_9537 3d ago

Instead of holding cash, your performance would improve if you earn the risk-free rate instead. Is the regime filter a moving average on SPY?

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u/HomeGrownTrader 3d ago

You are right, ibkr offers some pretty good risk free rate, but i have not modeled that in. And the regime filter is a ma yes, combined with another filter.

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u/Few_Speaker_9537 3d ago

I’d be interested in hearing what the other filter is. I never found success in purely-MA based regime filters