RavenPack partners with The Thalesians to filter FX carry trades

RavenPack, leading provider of real-time news analysis services to enhance returns through additional alpha generation or protection from event risk to financial institutions announced that it’s RavenPack News Analytics (RPNA) has added new sentiment indicators, farther-reaching event novelty analytics and an expanded taxonomy focusing on macroeconomic and geopolitical risks to its Global Macro service.

To test enhancements, it’s partnered with The Thalesians to examine how to reduce drawdowns and improve returns from the FX carry trade.

The new version of RPNA will help reduce the time needed to discover and test new strategies or techniques that may enhance alpha generation, mitigate risk or help identify potential market abuse and insider trading.

Saeed Amen, quant strategist at The Thalesians and a former executive director in Quantitative Strategy at Nomura, researched the data for the foreign exchange market. In summary, Amen showed how news-based filters can alleviate drawdowns during times of risk aversion on FX carry trades.

Specifically, he finds that the filters considerably improve risk-adjusted returns for a G10 FX carry basket when compared to an unfiltered basket (or a generic VIX filter), with risk-adjusted returns of 0.84 compared to 0.41 since 2002; cut drawdowns for FX carry in half, compared to either an unfiltered or VIX filtered strategy; reduce drawdowns for long-only S&P500 futures strategies to 26.1% from 57.1%, whilst increasing risk-adjusted returns to 0.44 from 0.31


His research also suggests the aggregated RavenPack filter likely has applications to more broadly filter high beta strategies elsewhere.

White Paper: Filtering FX Carry Using RavenPack News Analytics (PDF)

Full list of RavenPack news sentiment indicator enhancements can be accessed here

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