Hello everyone!
Over the past couple of months, the entire Squirl team has worked hard on multiple developments that we are thrilled to share with you! Between our transition away from currency markets, starting to paper trade our own strategies, bringing on a new Chief of AI/product, starting a new joint venture, and attending our first conference – a lot has happened this summer. Read on to find out more.
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Transition Away from Live Trading with BCM
In our Q1 letter, we talked about the rocky start we had with live trading the FX algorithm created for BCM Partners due to the unfortunate circumstance of beginning a couple of days before the Russia-Ukraine conflict. Throughout Q2 and the first few weeks of Q3, we continued having the algorithm run live while monitoring performance and making minor adjustments along the way. However, with the worsening macroeconomic climate starting to create a sigma event for currency markets, we ultimately decided to suspend trading and turn off this strategy in mid-June. Despite the turmoil faced by global macro this year (especially EURUSD – which is what we had been trading), our live portfolio managed to significantly outperform broader markets with a -1.49% final portfolio return thanks to our 1.62 risk-reward ratio.
This experience has given us a new perspective on the behind-the-scenes work that is necessary after an automated strategy goes live – from parameter tuning and maintenance to dealing with operational issues caused by third parties. We also gained first-hand exposure to the importance of being adaptable during regime changes, which reinforces the necessity of pairing trading strategies with adaptive forward-looking systems to have a sustainable edge over markets. We are incredibly thankful to have had the opportunity to work with BCM Partners on this project and are looking forward to exploring other areas of potential collaboration between our two firms.
Squirl’s Own Portfolio
Starting with some initial research efforts that began last summer, our entire team has been diligently working to create our own portfolio with automated trading strategies for trading equities. After months of hard work, we are thrilled to announce that our first fund will be live in the next 6 weeks to manage the capital of those associated with the firm. As shown in the images below, our initial paper trading results from the first stage of validation (which began about 2 months ago in early July) show a 3.55% portfolio return and 1.62 Sharpe ratio from closed trades compared to a 2.35% return and 0.78 Sharpe for SPY during the same period.
Over the coming weeks, we will be moving into further stages of validation, finishing the final aspects of development with our proprietary algorithmic trading framework called Chirp, incorporating our machine learning models that dictate position sizing and trade management, and finalizing some logistical aspects around the fund. Chirp is a multi-asset trade execution system designed to intelligently handle risk capital allocation, position sizing, and trade management. Through the use of this framework and our diversified set of strategies that take advantage of short to mid-term movements, our automated portfolio management solutions aim to effectively manage your capital so it can thrive regardless of current conditions or potential turbulence impacting broader markets. We will be sharing more results in the next couple of weeks as our validation work progresses. Feel free to take a look at our whitepaper (embedded below) for additional details about our investment thesis and strategy.
Our New Chief of AI/Product
Speaking of machine learning, we are thrilled to announce that our pre-seed Angel Investor Mo will be joining us as Chief of AI/Product to design and oversee the development of novel AI-powered strategies, and to productize Squirl’s research into winning solutions and offerings. Through his years of hands-on experience in the autonomous vehicles space and the development of personal automated trading strategies that incorporate AI into the decision-making process, we are highly optimistic for the future of our services as Mo spearheads the creation of insightful machine learning models.
Ultima Insights – An Exciting New Venture
As we continue to build out Squirl towards our ultimate vision of making markets more accessible to the average individual, we are always open to partnerships that benefit this goal. As a giant first step toward this mission, we are proud to announce our joint venture with Noahs’ Arc Capital Management to create Ultima Insights, a SaaS company where we are building an intuitive dashboard that empowers retail traders and small funds with options-driven data analytics alongside a whole suite of insightful tools that provide timely information for traders of all experience levels to be better equipped to navigate volatile markets. The team behind Noahs’ Arc is two business students from the University of Michigan who are running a discretionary options-focused fund. By making hedge fund quality tools, analytics, and insights available to the general public, our collective vision for Ultima Insights is to make markets more transparent by revealing the hidden insights that small traders may not have the time, resources, understanding, or data to find. While our goal with our initial Forage tools platform was somewhat similar (demystifying current events with a stock screener and a market analysis tool), our plans with Ultima Insights are much larger in scope and also include a community ecosystem designed to promote the spread of ideas and knowledge about current market events.
A little bit more than 2 months ago, we were finally able to make this partnership a reality, and have been able to make significant strides towards getting some products built out. We are also currently in talks with some major data vendors and brokerages to incorporate their data/services into our platform. This venture will add to Squirl’s capabilities in many ways, and we are incredibly excited to see what the future will bring! We encourage you to check out and subscribe to Ultima’s newsletter, which will be linked below. We are thrilled to share what products we are developing and our big “why” for starting the venture in our first post (our whitepaper), which will be out soon.
Cornell Future of Finance Conference
This past week, Adi, Brendan, and Alex attended the Cornell Future of Finance Conference in Manhattan, where dozens of industry professionals spoke about various applications of Machine Learning to Quantitative Finance. Some of the key takeaways we gained from this conference included the following themes:
Markets are a living body where actions have immediate impacts
Incorporating causal inference as a means of identifying the causality behind complex phenomena
The usefulness of regime-switching models
Methods of generating synthetic datasets for walk-forward analysis and stress testing
Using alternative data to complement trading signals
The applicability of NLP and large language models to have a global understanding of market conditions
We are looking forward to incorporating everything we learned into our day-to-day processes at Squirl.
While in New York City, we also got a chance to meet up with Oscar where we talked about a potential opportunity that will help us substantially grow our track record. We are looking forward to learning more details about this soon!
A Personal Note
As the Fall 2022 school semester started a couple of weeks ago for Adi, Alex, and Brendan, we would like to take a moment to share our goals as a team for the coming months:
Launching fund 1 for prop trading and limited friends & family
Raising a $250K Pre-Seed for Ultima to kickstart development
Talk to you all soon in the next newsletter!