Video: Man AHL Explains Signal Diversification

Man AHL created the AHL Explains video series in an effort to demystify quantitative investing through an engaging and user-friendly medium. The videos seek to bring essential quantitative investing concepts to life through illustrations and graphics, and explain the key concepts in futures trend following in a simple and accessible way.

“Signal diversification” refers to relying on several signaling systems – such as momentum, technical, and fundamental systems – to inform trading decisions. The purpose of this diversification, like all kinds of diversification, is to boost returns per unit of risk. As Man AHL explains in this video, commodity traders might rely predominantly on momentum signals, but use technical and fundamental systems as diversifiers; while managers of multi-strategy portfolios may use all three more evenly. Examples of momentum indicators include trend filters, breakouts, and curve momentum. Technical indicators include spreads, butterflies (mean reversion), and volatility systems. And fundamental systems include FX and commodity carry strategies.

AHL Partners LLP is the sub-advisor to the American Beacon AHL Managed Futures Strategy Fund.

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