Overview of Major Quantitative Trading Strategies in China

Let me take stock of it todaySeveral major trading strategies in the Chinese market. The first is a market-neutral strategy. The neutral market strategy, also known as the alpha strategy, is one of the most commonly used strategies by domestic quantitative private equity funds. Simply put, Alpha Strategy’s gameplay in China is to buy a portfolio of stocks, short-sell stock index futures, and hedge market risks by establishing long and short positions. As long as the stocks they buy can outpace the market's rise, they will be profitable. The Alpha strategy is stable and has a low rate of return, and is suitable for volatile markets. The next step is a macro hedging strategy. Macro hedging strategy is to analyze macro factors such as policy factors and economic trends through comprehensive analysis.

Make expected judgments on the prices of investment products such as stocks, bonds, currencies, etc., and rotate allocations between different types of assets through quantitative and qualitative analysis. Take the U.S. election that was settled some time ago as an example. After Biden takes office, if hedge funds make optimistic judgments about the U.S. economy after detailed scientific analysis, they will gradually make more U.S. stock assets, withdraw from emerging markets, and short emerging markets. To play the role of a macro hedging strategy, it is necessary to accurately judge global macroeconomic trends.

CTA strategy is a strategy that uses quantitative means to manage futures strategies, determine the time points for futures product transactions, and implement computer-programmed trading. Futures T plus zero determines that programmed high-frequency trading will have more advantages than manual trading. Therefore, in the process of implementing high-frequency futures strategies, not only the competitive strategy, but also the system configuration and order speed are very important.Cross-variety arbitrage, event arbitrage,term arbitrage, commodity futures, stock index futures intertemporal arbitrage and other strategies. Compared with foreign countries, there are not many domestic financial instruments and varieties. Domestic arbitrage strategies mainly look for directional arbitrage opportunities through price increases and decreases, but market fluctuations will be very small. At this time, it is difficult for arbitrage strategies to find arbitrage opportunities. Therefore, domestic arbitrage hedge funds usually build arbitrage compound strategies by adding other small strategies.

For example, when arbitrage opportunities are scarce, arbitrage funds may add some alpha strategies or trend speculation.

The so-called stock long and short strategy is actually somewhat similar to the Alpha strategy, but the difference is that the stock long and short strategy is open to long or short positions, because the market needs to judge long and short positions and has higher requirements for the ability to select opportunities, so the operation is relatively difficult. Stock long and short strategies are also divided into various types, such as statistical arbitrage strategies and 13030 strategies.

Statistical arbitrage strategies are very common and rely on statistical analysis of some regular correlations between two stocks. When the relative price difference between two stocks is higher than the operating cost, a long or short position is actually constructed, waits for the price difference to disappear, and then closes the position to realize revenue.

Quantitative longing is the use of quantitative models to select stocks and trade timing. Quantitative stock selection models mainly use multi-factor models, and in recent years have combined feature methods, machine learning and neural networks. What is a multifactor model? In fact, it's almost like a talent show. There are many factors in stock selection for the judges, who sit there and score the stocks. Those with high scores can be bought, and those with low scores or even substandard stocks can be eliminated. Therefore, subjective bulls study stocks. Well, quantitative bulls study the stock selection factors, the judges. If these judges perform well, the selected stocks can make a lot of money, but if these judges lose the chain, the performance of the fund will be affected. Finally, there is the index enhancement strategy. Strictly speaking, the index enhancement strategy is an ongoing quantitative long strategy.

Stock investment is divided into active investment and passive investment. Passive investment refers to an investment method that completely replicates the index and follows the index. Contrary to passive investing, active investing is based on the investor's knowledge and experience rather than passively following an index. Active investment is expected to exceed market returns, and passive investment meets the market average return. Exponential enhancement combines the characteristics of both. Index enhancement attempts to adopt some judgment benchmarks based on tracking the index, reduce the weight of stocks that are not optimistic, or close positions in Jianghan good stocks to increase yields, which is called index enhancement.