Strategies · Library · Currencies
§8.4Trend
Momentum & carry combo
Mix a currency momentum rule with a carry rule, weighting each to minimise variance of the combined return using past return correlation.
Open in the builderAs a long-only proxy; see how ARCANE uses it.
- Asset class
- Currencies
- Held for
- Months
- Data
- ARCANE has part of the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Return series of each sub-strategy and their correlation.
- Entry and exit
- Rebalance the blend periodically.
- Sizing
- Variance-minimising two-way weights.
How it fails
- Both sleeves fall together
- Estimation error
- Costs
Data it needs
- FX spot rates
- forward rates
- strategy returns
Spot closes exist; carry inputs do not.
How ARCANE uses it
The momentum half could support a currency Call.
Builds as a long-only proxy. Keeps only the momentum half, long-only across a few pairs; carry and the blend are dropped.
Filed under the trend card
Hold each market in the direction of its own return over the past year, and size every position to the same expected volatility.
A paper plan from this card holds 21 to 252 days, stops at 2× the expected move and uses at most 100% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §8.4, p. 89 of the SSRN version. Described in our words. Trend is ARCANE’s filing, not the book’s.