EWMA Risk Parity for a Leveraged Multi-Asset Portfolio

Summary

The document describes a portfolio strategy for BTC, gold, a US equity index, and crude oil perpetual contracts. It estimates covariance from recent 15-minute log returns with an EWMA scheme, then iteratively assigns weights intended to equalize assets’ risk contributions. The strategy also chooses long or short directions from each asset’s covariance with an equal-volatility reference portfolio, and adjusts leverage toward a target annualized volatility. Scheduled rebalancing, weight-drift and direction-change triggers, an emergency position reduction rule, and a cash reserve round out the risk controls.

The document gives implementation parameters and an operational dashboard description, but provides no backtest results or evidence that the proposed signals are profitable. Its description also leaves important practical questions, including transaction costs, contract specifications, and how the direction rule interacts with risk-parity weights. The source code is truncated, so the full implementation cannot be assessed; live deployment would require independent validation of calculations and execution behavior.

Key ideas

• Risk parity seeks to balance each asset’s contribution to portfolio risk rather than allocate equal capital.
• The covariance estimate weights recent return observations more heavily through EWMA.
• Long and short directions are selected using covariance with an equal-volatility reference portfolio.
• Leverage is adjusted using estimated portfolio volatility, subject to a stated maximum.
• The strategy combines scheduled rebalancing with drift, direction-change, and emergency-reduction triggers.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.