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Baltic Dry Index > Forecasting     Correlations     Forecasting

Forecasting

quantf research Forecasts

Date Position
2016-06 Short

Historical Cumulative Return

Performance Evaluation

Statistics Quantf Long Quantf Long/Short BDI
Average 0.04 0.06 0.02
Volatility 0.02 0.02 0.03
Sharpe 1.94 2.88 0.82
Max 0.04 0.04 0.04
Min 0.00 -0.03 -0.01
Cumulative 0.96 1.70 0.42
Drawdown 0.01 0.03 0.11
Duration 39.00 6.00 71.00
Profit/Loss 4.74 2.29 2.05
Win Rate 0.41 0.87 0.48
Expectation 1.36 1.88 0.48

What is the quantf research BDI Forecasting all about?

The quantf research BDI Forecasting is a product of quantf research website (www.quantf.com). We provide monthly forecasting suggestions for opening a 12-month contract positions on the Baltic Dry Index (BDI).

What is the BDI? Why is it important?

The Baltic Dry Index (BDI) is the major index for dry cargo freight rates. One can, therefore, easily surmise that it would be highly correlated with the pricing path of all these commodities and currencies that are associated with dry cargo transportation. Our intention is to provide useful suggestions to the investor in understanding the interconnections amongst them and to devise investing strategies for investing in them or hedging them or the BDI.

How do I read the quantf research BDI Forecasting table? What is the strategy here?

The quantf research BDI Forecasting provides a monthly suggestion for a position trading on the BDI. Our research Papailias and Thomakos (2013d) suggests that the BDI exhibits considerable cyclicality which can be used for improving forecasting performance. If the BDI was itself tradable then one could have used our forecasts to take positions over the next 12 months and either invest on or hedge other strategies that run on commodities or related assets. Each month a forecast is issued which recommends a long or short position over the next 12 months. This implies taking multiple positions over time. Although not a feasible strategy (directly) based on the data we have, our forecasts can be used in constructing other strategies based on correlations of the BDI with other tradable commodities (such as our ETFs in the quantf research BDI Correlations).

Should I invest in the quantf research BDI Forecasting?

A direct investment on the BDI is infeasible. Futures contracts on the BDI do not exist anymore. However, securities that are highly correlated with the BDI could be used instead.  For our forecasting evaluation purposes we act as if the BDI itself was tradable.

How do I read the Historical Cumulative Return figure?

This figure illustrates three lines. Each line represents the following strategies:


  • quantf Long (blue): this investment strategy invests in the BDI only if the quantf forecasting suggestion is “long”. Otherwise, if the forecasting suggestion is “short”, the strategy invests in a risk-free asset (or we stay out of the market).
  • quantf Long/Short (black): this strategy uses both the “long” and “short” forecasting suggestions.
  • BDI (green): this strategy invests on the BDI all the time (buy-and-hold on the BDI). 

What do all the statistics mean?

  • Average: the annualised arithmetic mean return of the respective strategy. The typical investor wishes for large average values.
  • Volatility: the annualized standard deviation of the respective strategy. The typical investor wishes for small volatility values.
  • Sharpe: the ratio of average over volatility. The typical investor wishes for large Sharpe Ratio values.
  • Max: the maximum daily return of the respective strategy.
  • Min: the minimum daily return of the respective strategy.
  • Cumulative: the cumulative return of the respective strategy. The typical investor wishes for large Cumulative values. This is expressed in decimals instead of percentage; e.g. 1.00 instead of 100%.
  • Drawdown: the maximum drawdown of the respective strategy. The maximum drawdown could be simply interpreted as the largest decline in ETF value in percent from a historical peak. The typical investor wishes for small drawdown values.
  • Profit/Loss: the ratio of the arithmetic mean of positive returns over the (absolute value) of the arithmetic mean of negative returns. The typical investor wishes for large Profit/Loss values.
  • Win Rate: the percentage of time that the strategy exhibits positive returns.
  • Expectation: indicator of anticipated performance computed as (1+Profit/Loss)*(Win Rate) – 1.

 

How often are new forecasts produced?

New forecasting signals are provided on a monthly basis. 

What is the source of the data used?

In all computations the ETF data is collected from Yahoo! Finance (finance.yahoo.com). The BDI values are collected from the Open Financial Data Project (http://www.quandl.com).  quantf research is not responsible for the accuracy of the data. quantf research does not redistribute the data which are used exclusively for research and information purposes.

References

Papailias, F., Thomakos, D. D. (2013c). The Baltic Dry Index: Cyclicalities, Forecasting and Hedging
Strategies. quantf research working paper series.

  
F. Papailias - D. Thomakos, (c) 2014
 
 
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Disclaimer: The contents of quantf research (c) website (http://www.quantf.com) are provided for research and information purposes only. Prices, returns, strategy recommendations and all statistical estimates in general shown in this webpage are indicative and the authors are not offering to buy or sell or soliciting offers to buy or sell any financial instrument. The views in this website are those of the authors alone and are subject to change at any time. The authors of this webpage do not accept any liability whatsoever for any direct or consequential loss arising from any use of the information provided. The information in this webpage is not intended to predict actual results, which may differ substantially from those presented.