Ai for Alpha Unveils Its Cutting Edge New CTA Daily Decoding Strategy: The “CTA Decoding 2.0.”

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PARIS–(BUSINESS WIRE)–

“This cutting-edge strategy represents a significant leap forward in Ai for Alpha’s decoding replication technology, offering a refined approach to the already high-performing CTA replication model developed by Ai for Alpha,” says Beatrice Guez, CEO of Ai for Alpha.

“The CTA Decoding 2.0 has been designed in response to the success of our initial CTA decoding strategy launched in 2022,” adds Thomas Jacquot, head of Business Development. “It’s a valuable addition to our offering, along with global macro, risk parity, long/short equity, and global balanced strategies, which are all replicated with high correlation using liquid market instruments.”

The CTA 2.0 strategy introduces two significant innovations over the original Ai for Alpha CTA Decoding:

1. Enhanced Factor Replication

The enhanced CTA Decoding infers exposure to both Trend factors and individual markets across various asset classes. This dual approach captures the CTA non-linear behaviors and directional biases.

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2. Daily Decoding

“The updated strategy tracks the dynamics of betas daily, in contrast to our original strategy’s monthly decoding. It incorporates daily allocations based on the betas to both individual markets and trend factors, enhancing replication accuracy and reactivity,” explains Jacquot. “Both the original and new strategies exhibit an 85% correlation with the CTA Trend Benchmark. They demonstrate a high daily correlation of 94% with each other. The inclusion of pure market factors in the CTA Daily Decoding provides enhanced resilience in non-trending conditions, as observed in 2023, at the cost of a marginally lower performance in highly trending scenarios, such as those experienced in 2022.”

Yearly Performance of Ai For Alpha CTA Decoding Strategies (source: Out-of-sample Backtesting Ai For Alpha)

The performance data reveals how the CTA Daily Decoding strategy outperforms the original CTA Decoding across various years, especially in adverse non-trending market conditions.

 

CTA Daily

Decoding

CTA

Decoding

Difference

2024 YTD (as of 5 March)

10.1%

6.0%

4.1%

2023

-3.5%

-10.5%

7.0%

2022

17.7%

27.4%

-9.7%

2021

6.0%

4.8%

1.2%

2020

9.6%

6.8%

2.8%

2019

14.5%

8.3%

6.2%

2018

-5.9%

-4.0%

-1.9%

2017

12.3%

14.0%

-1.7%

2016

0.2%

-1.6%

1.8%

2015

11.4%

10.2%

1.2%

2014

44.8%

34.2%

10.6%

2013

16.0%

11.6%

4.4%

2012

-0.2%

-4.3%

4.1%

2011

15.6%

14.6%

1.0%

Comparative Performance

The detailed comparison of the CTA Daily Decoding and CTA Decoding strategies highlights their annual returns, volatility, maximum drawdown (Max DD), Sharpe Ratio, and the ratio of return to Max DD. This data illustrates the improved performance and risk-adjusted returns of the CTA Daily Decoding compared to the original strategy.

 

CTA Daily

Decoding

CTA

Decoding

Annual Return

10.70%

8.80%

Annual Volatility

12.50%

10.90%

Max DD

18.60%

19.10%

Sharpe Ratio

0.86

0.81

Return / Max DD

0.57

0.46

About AI for Alpha, Ai For Alpha is a leading provider of AI-powered market signals and investment models to asset managers and large financial institutions in Europe, the Americas, and Asia. The company has received numerous awards for its achievements in AI applied to finance, including the EIT’s European Digital Label for Innovation and the Women TechEU 2023 award. Ai For Alpha’s publications rank in the top 1% of most-read articles on SSRN, the world’s leading open-access research platform.

For more information, visit www.aiforalpha.com

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