finantic.DynamicPortfolio
Creates a Portfolio that consists of symbols that work well with your strategy and have low correlations among each other. This can boost the efficiency and profitability of your trading strategy tremendously.
$99.95 / Lifetime
Try before you Buy! Download the Extension for a 14-day free trial before purchasing.
(all Extensions require a Wealth-Lab Subscription)

finantic.DynamicPortfolio

The most overlooked and underestimated way to improve a trading strategy is the selection and adjustment of the portfolio.
--- Rainer Sievers

The finantic.DynamicPortfolio extension works with an unusual but interesting idea: Instead of adapting a trading strategy to a given portfolio, the portfolio is adapted to a given strategy.

The goal of DynamicPortfolio is to construct a (short-term) portfolio that

  1. contains symbols that work well with a given strategy, i.e. symbols that showed good profits in the past.
  2. contains symbols that show low correlations with the rest of the portfolio.

Correlations and profitability are measured in one interval (the lookback interval). The results of these measurements are used to create a new Portfolio. The resulting portfolio is used in a non-overlapping more recent interval. The whole process is repeated with intervals shifted by a certain amount (the WalkForwardStepSize) into the future resulting in a walk forward kind of procedure.

Another way to look at the process is the notion of rebalancing the portfolio after a certain number of trading days.

There is a number of plots that visualize the various settings and their effect on the outcome. These plots show the persistence of Correlations or Profitability. Please make sure you have the finantic.InteractiveGraphics extension installed.

The finantic.DynamicPortfolio extension:

  • contains a single building block in the Conditions section. Use this condition with your entry block.
  • comes with a verbose Help page that contains step-by-step instructions and background information.

A C# API allows you to create and use dynamic portfolios with your C# coded strategy.

Requirements

This extension requires the finantic.Indicators extension.

Suggestions

finantic.InteractiveGraphics extension, PowerPack extension

Click here for more information on the finantic.DynamicPortfolio Extension.

Screenshots

Building Block
The finantic.DynamicPortfolio extension contains a single Building Block that is used as a Condition Block for your Entry.
Correlation vs Lookback
There are many parameters. To help determine good settings, the extension comes with a number of graphics. The first graphic answers the question: What lookback interval length should I use to calculate the correlations?
Persistence of Correlation
The second plot shows the relation between past correlations and future correlations, also called persistence of correlation.
Persistence of Probability vs Lookback
There is a plot that answers the question: What lookback interval length should I use to calculate profitability?
Persistence of Probability vs Metric
Another plot compares the metrics used to calculate profitability.
Persistence of Probability vs Min Trades
The following plot answers the question: What is the minimum number of trades to consider before calculating a result?
Equity Curves
As a proof of concept below is a comparison of actual equity curves. One with a constant portfolio (blue), the other with a dynamic portfolio (red) with position sizes adjusted to arrive at the same drawdown.
Performance Metrics
Finally, the performance metrics of the two backtests above.

Change Log

Wealth-Lab 8 Build 1 - 3/14/2025
  • Initial release.

Discussions