Combining Strategy Equity Curves with Mean–Variance Optimization

Summary

The document asks how to combine daily equity curves from strategies trading commodities and currencies, with the goal of maximizing the portfolio Sharpe ratio. The reply points to Modern Portfolio Theory and the Markowitz model, which allocates across strategies using their historical returns and risk relationships. In principle, the portfolio weights reflect not only each strategy’s individual performance but also how the strategies’ returns covary.

The suggestion is brief and does not provide calculation steps, constraints, or a worked allocation. It frames historical optimization as one way to choose weights while acknowledging that market movements cannot be predicted. A Sharpe-maximizing allocation estimated from past data can be sensitive to the sample period and estimated inputs; the response does not discuss out-of-sample validation, leverage or weight limits, transaction costs, or changes in strategy behavior. The document therefore introduces a portfolio-construction approach but leaves practical implementation and robustness checks unspecified.

Key ideas

• Markowitz mean–variance optimization is suggested for combining strategy return series.
• A Sharpe-maximizing portfolio depends on historical return and risk estimates.
• Strategies’ covariance matters alongside their individual performance.
• Historical optimization does not make future market movements predictable.
• The reply omits implementation constraints and validation details.

Tags

# Combine together different strategies in one portfolio


# Combine together different strategies in one portfolio












Hi I have generate equity of my strategies which invest in commodities and currencies at daily interval. What the best method to combine together all strategies in one portfolio? I want to make the highest Sharpe Ratio ass possible.

thanks

## Answer by arodrisa (score 0)

https://quant.stackexchange.com/a/15256

Well, thats not an easy task. Because you can't predict the movement of the market.

But if you want to do it based in historical data, you only have to apply the Modern Portfolio Theory by applying a Markowitz Model, which maximices the Sharpe Ratio. I have done it with Excel, is not hard but you need to know the steps, there are many tutorials, just google it.

Hope this works.

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