Today I did a couple more GOOG trades. Buying 80 GOOG, selling 100, shorting 80 and then buying back 50. So I ended the day short 30 GOOG. The first trade made about $180 and the second lost about $20. This is pretty typical of daytrading I think. Trading tens of thousands of dollars of stock for a couple of hundred dollars gain. Nothing glamorous. But if you worked at it every day and made $200 a day, that is $50,000 a year... I trade purely on technical analysis. A mixture of my own proprietary indicator, the basic indicators any charting program gives you - stochastics, MACD etc. - and Elliott Wave and traditional pattern based TA. You have to synthesize all that data together.
On mutual funds, yesterday I downloaded the last few months of prices for several funds in the Australian funds family I am invested in (Colonial First State). I analyse the funds I actually own plus some others I might think of buying. The analysis includes looking at how they perform in up and down markets, a correlation analysis, and a crude estimate of "alpha".
The correlation analysis is just the correlations computed using Excel of their daily rates of return over a five year period. To compute alpha, I regress the daily returns of each fund on the returns of their Diversified Fund.
Most of the funds I tested with the exception of their "High Growth Fund" have positive alpha relative to the Diversified Fund - i.e. adjusted for risk they outperform it. I don't even bother analysing their international stock funds. Those are so lousy it isn't even worth it - they are a top manager of Australian and resource stocks but not of general international stocks.
The update pretty much confirmed my previous analysis that the Future Leaders, Developing Companies, and Global Resources Fund have a relatively low correlation to each other and to the Conservative, Diversified, Imputation, and Geared Funds. The Geared Share Fund borrows on margin to buy Australian Shares and otherwise is pretty similar to the Imputation Fund. The Conservative Fund is 30% stock and 70% bonds and cash. These four funds are fairly highly correlated with each other and Conservative, Geared, and Imputation outperform Diversified. Therefore, my market timing strategy includes having the core of my portfolio in either the Geared Share or Conservative Fund and maintaining positions in Future Leaders, Developing Companies, and Global Resources for diversification purposes.
I perform a similar analysis also on my TIAA-CREF funds. Currently I hold CREF Bond Market and TIAA Real Estate in my 403(b). Neither has a high correlation with each other or much correlation with the general stock market or my own performance.
My own performance using monthly data has about a 50% correlation with the MSCI global index and in the last three years strong and increasing alpha. This is good news it shows I am improving in skill. Maybe if I could be bothered I could be a hedge fund manager :)
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