**Timely Portfolio**, and kindly contributed to R-bloggers)

There must be a useful insight, concept, or system provided by the new S&P 500 High Beta and Low Volatility Indexes. Now with the announcement by Powershares of etfs for these indicies http://www.invescopowershares.com/volatility/, any of these potential insights, concepts, or systems seem viable. The indexes are available through the S&P website in spreadsheet form

http://www.standardandpoors.com/indices/sp-500-high-beta/en/us/?indexId=spusa-500-usdw-hbp-us-l–

or through Bloomberg with SP5HBIT for High Beta and SP5LVIT Low Volatility.

If we apply some basic techniques of relative strength and momentum introduced in previous posts, we can build a switching strategy between the High Beta and Low Volatility Indexes.

From TimelyPortfolio |

Or with the same signals, we can use the relative strength (RS) signal to generate entry and exit signals for the overall S&P 500 index.

From TimelyPortfolio |

R code:

require(quantmod)

require(PerformanceAnalytics)

#don’t think it is possible to download directly from S&P

#but can get a spreadsheet to use from

#http://www.standardandpoors.com/indices/sp-500-low-volatility/en/us/?indexId=spusa-500-usdw-lop-us-l–

#http://www.standardandpoors.com/indices/sp-500-high-beta/en/us/?indexId=spusa-500-usdw-hbp-us-l–

#also these indicies are available through Bloomberg and Reuters

#Bloomberg access with R is possible through RBloomberg

SPHighBetaLowVol<-as.xts(read.csv(“sphighbeta-lowvol.csv”,row.names=1,stringsAsFactors=FALSE))

SPIndexes<-merge(SPHighBetaLowVol,getSymbols(“^GSPC”,from=”2006-01-03″,auto.assign=FALSE)[,4])

SPIndexesReturns<-ROC(SPIndexes,1,type=”discrete”)

charts.PerformanceSummary(SPIndexesReturns)

#let’s try an easy relative strength signal and index filter

#know I can do this better in R but here is my ugly code

#to calculate 125 day or 1/2 year slope of high beta/low vol

width=125

#get relative strength slope of high beta/low vol

for (i in 1:(NROW(SPIndexes)-width)) {

model<-lm(SPIndexes[i:(i+width),1]/SPIndexes[i:(i+width),2]~index(SPIndexes[i:(i+width)]))

ifelse(i==1,indexRS<-model$coefficients[2],indexRS<-rbind(indexRS,model$coefficients[2]))

}

indexRS<-xts(cbind(indexRS),order.by=index(SPIndexes)[(width+1):NROW(SPIndexes)])

#get slope of total S&P on shorter term 75 day

width=75

for (i in 1:(NROW(SPIndexes)-width)) {

model<-lm(SPIndexes[i:(i+width),3]~index(SPIndexes[i:(i+width)]))

ifelse(i==1,indexSlope<-model$coefficients[2],indexSlope<-rbind(indexSlope,model$coefficients[2]))

}

indexSlope<-xts(cbind(indexSlope),order.by=index(SPIndexes)[(width+1):NROW(SPIndexes)])

signals<-na.omit(merge(lag(indexRS),lag(indexSlope),SPIndexesReturns))

ret<-ifelse(signals[,1]>0&signals[,2]>0,signals[,3],ifelse(signals[,1]<0&signals[,2]>0,signals[,4],0))

perf_compare<-merge(ret,SPIndexesReturns)

#name the columns for charting

colnames(perf_compare)<-c(“RotationSystem”,colnames(perf_compare)[2:4])

charts.PerformanceSummary(perf_compare,main=”Rotation System with S&P Indexes)

#now let’s use the RS signal to determine entry exit to overall SP index

#when high volatility is outperforming go long S&P 500

ret<-ifelse(signals[,1]>0,signals[,5],0)

perf_compare<-merge(ret,perf_compare)

colnames(perf_compare)<-c(“SP500TacticalBasedOnRS”,colnames(perf_compare)[2:5])

charts.PerformanceSummary(perf_compare,main=”Systems Comparisons with S&P Indexes)

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**Timely Portfolio**.

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