A Professional Quant Based Portfolio Trading Strategy
Navigator is a bond ETF strategy that rotates through four different types of bond ETF’s. It uses a unique edge found in the bond markets to generate alpha. The fact that both the edge found in this strategy is unique to bonds and that it uses bonds ETF’s rather than equities makes it a very powerful addition to any portfolio. It is uncorrelated with just about every other strategy that we trade. It therefore tends to lessen drawdowns, and smooth equity curves when added to other equity strategies.
Only trades once a week
Multiple portfoliso to choose from
Trades 4 ETFs only: CWB, TLT, JNK, VCLT
Long trades only
Developed by professional quant based researchers
Trades take about five to ten minutes per day to enter
Results live from June 2022
This is a unique strategy. I know the overall CAGR’s aren’t as large as the equity strategies, but the beauty in Navigator is just how uncorrelated it is from everything else. Bond ETF’s aren’t as popular with traders, and the edges here are less likely to be affected because traders just don’t tend to go after bond ETF’s.
The alpha generated in such low volatility ETF’s is impressive, and the equity curves are steady up for both variations.
Because of how uncorrelated, Navigator is from the other strategies, I have added this to my portfolio because when my equity strategies aren’t working-this tends to hold up well.
The other great part about trading Navigator is that it is just easy to trade. You are only in 1 position at a time and it trades relatively infrequently. It is elegant, simple, profitable and uncorrelated.
Testing period is from January 1, 2008 to September 30, 2024 and metrics are updated after the end of each quarter.
Live trading signals have been published on the site since February 2023. You will have access to all entry & exit signals since then.
Portfolio 1 – Magellan
Trades 4 ETFs only: CWB, TLT, JNK, VCLT
Portfolio Statistics
11.9% Compounded Annual Returns
90.1% Exposure
0.84 Sharpe Ratio
Top three drawdowns(-29.2, -12.7, -12.6)
-5.9% Worst 3 month return
-4.8% Worst 12 month return
+29% Best 3 month return
+62% Best 12 month return
0.16 correlation with the S&P500 index
Trades Statistics
387 Trades with 55.0% winners
2.0% Average % profit on winning trades
-1.3% Average % loss on losing trades
-6.5% Worst trade
27.8% Best trade
10.8 average trading days held
Maximum of 1 positions
100% of portfolio per position
Equity Curve since 2008
Monthly Returns
I have over a decade of quant trading experience and am the Chief Investment Officer for a quant-based advisory firm. I’ve known Cesar for 8 years and he is my first and foremost “go-to” resource for financial markets research, quantified strategy development, and coding. Unlike some theoretical “quants,” Cesar is also a trader. He understands the markets and the real-world limitations of broker order offerings, liquidity, and order placement. Rob Davenport, LCA Capital, LLC
Portfolio 2 – Vespucci
Trades 4 ETFs only: CWB, TLT, JNK, VCLT and uses a bond market timing indicator.
Portfolio Statistics
9.4% Compounded Annual Returns
53.8% Exposure
0.76 Sharpe Ratio
Top three drawdowns(-14.7, -13.4, -12.8)
-9.5% Worst 3 month return
-8.8% Worst 12 month return
+35% Best 3 month return
+43% Best 12 month return
—–0.04 correlation with the S&P500 index
Trades Statistics
277 Trades with 55.2% winners
2.1% Average % profit on winning trades
-1.2% Average % loss on losing trades
-4.8% Worst trade
27.8% Best trade
9.2 average trading days held
Maximum of 1 position
100% of portfolio per position
Equity Curve since 2007
Monthly Returns
There’s no way I’d be professionally managing money today were it not for the professional advice and help of Cesar Alvarez. I’ve yet to meet a trader/researcher with such a superb understanding of the markets; as well as the dangerous trapdoors that await if you decide to develop your own quant system. Mark Angil, Architect of Midway II, 1st Place Winner of BattleFin’s Sharpe Ratio Shootout International Quant Finance Tournament 4.0 (Pro Division)
Portfolio 3 – Zwicky
Trades 4 long ETFs : CWB, TLT, JNK, VCLT and 2 short ETFs: TBF and TBX. The short ETFs did not start trading until 2010. So results before then do not include them.
Portfolio Statistics
11.5% Compounded Annual Returns
98.0% Exposure
0.75 Sharpe Ratio
Top three drawdowns(-22.5, -18.6, -17.1)
-13.8% Worst 3 month return
-10.5% Worst 12 month return
+29% Best 3 month return
+62% Best 12 month return
0.03 correlation with the S&P500 index
Trades Statistics
441 Trades with 51.7% winners
2.1% Average % profit on winning trades
-1.3% Average % loss on losing trades
-5.9% Worst trade
27.8% Best trade
10.4 average trading days held
Maximum of 1 position
100% of portfolio per position
Equity Curve since 2008
Monthly Returns
Start your free one week trial
During your trial you will have access to all previous trades and commentary. Cesar or Steve are available to answer your questions.
I have been corresponding with Cesar and following his work for several years. His research is first rate and his reports are clear and unambiguous. He is an expert trading system developer and programmer. Most importantly, he has discovered profitable and persistent patterns, and developed profitable and practical trading systems around them. Dr. Howard Bandy Recognized Quant Author
The Researchers
Cesar Alvarez
Cesar is well known in the quant community from his trading blog, Alvarez Quant Trading, where he shares his trading insights and research. He also consults with traders to test their trading ideas and help them improve their current strategies. From 2004 to 2013, Cesar was the Director of Trading Strategies at TradingMarkets.com and Connors Research. Cesar has also developed many strategies for private equity funds, is the author of multiple books on trading, and — in a former life — was a Software Engineer on the early versions of Microsoft Excel. After so many years developing well over 100 different methodologies, Cesar, like many true masters of his profession, has come back to the point of ultimate simplicity and efficiency as the best sustainable approach to active trading.
Steven Gabriel
Steven has an extensive history trading equities, options, futures, and volatility. For the past 13 years he has been a quant-based trader, working alongside Cesar on research for 100’s of different ideas, concepts, strategies, and systems. Steve is also an Emergency Room physician. But he only practices medicine half-time now, because his success in trading financial markets.
