Portfolio Beta Neutral Risk

Entry Logic

• Not applicable. This is a risk management model.

Exit Logic

• Not applicable. This is a risk management model.

Stop Loss Structure

• Not applicable. This is a risk management model.

Risk Management Framework

• Risk per trade: Construct a portfolio of long and short positions to be beta-neutral to the overall market.
• Maximum daily loss limit: 3% of starting daily equity.
• Maximum weekly loss limit: 6% of starting weekly equity.
• Maximum drawdown allowed: 20% from peak equity.
• Risk-reward ratio requirement: Minimum 1.5R on all trades.

Position Sizing Model

• Sizing approach: Balance the beta-weighted value of long positions with the beta-weighted value of short positions.
• Volatility adjustment: None.
• Conviction sizing: Not applicable.
• Scaling in/out: Not applicable.

Trade Filtering

• Not applicable. This is a risk management model.

Context Framework

• Not applicable. This is a risk management model.

Trade Management Rules

• Not applicable. This is a risk management model.

Time Rules

• Not applicable. This is a risk management model.

Setup Classification

• Not applicable. This is a risk management model.

Market Selection Criteria

• Instrument requirements: A portfolio of stocks with known betas.
• Volume requirements: Not applicable.
• Volatility requirements: Not applicable.

Statistical Edge Metrics

• Not applicable. This is a risk management model.

Failure Conditions

• Strategy fails if correlations and betas change unexpectedly.
• Avoid using during major market shifts.

Psychological Rules

• Regularly rebalance the portfolio to maintain beta neutrality.
• Do not become biased to the long or short side.

Advanced Components

• Not applicable. This is a risk management model.

Location

• Strongest in a market-neutral trading strategy.
• Weakest in a directional, trend-following strategy.