Copper is the most important commodity used for renewable energy. The transformation of the global economy toward a cleaner, more sustainable and greener energy will require an important consumption of copper. It is used in energy systems to generate power from solar, hydro, thermal and wind energy across the world. Copper helps reduce CO2 emissions and lowers the amount energy needed to produce electricity.
Copper is very volatile and in this competition the challenge is to create an overlay long and short strategy in copper. A systematic overlay strategy is a financial trading strategy or method conducted to manage copper exposure in general and can be used by company who are planning to consume copper in the years to come. It is particularly useful for institutions who have a pre-existing exposure to copper from their business as long signal can be used for their hedging. The strategy can also help producer of renewable energy systems to time the market to purchase the copper they need.
In this challenge, you are required to find the best hedging strategy for copper, long or short using the future contract traded on the London Metal Exchange (LME Copper CA).
You must build a long-short and non-leveraged portfolio.
Your objective is to maximize the Sharpe ratio of your portfolio, but also to minimize the drawdown expressed by the minimum 3-year rolling Sharpe ratio. These 2 metrics will be taken into consideration to select the winner(s).
Use the tutorial notebook to get started:
The Investment Universe is composed only of the (properly rolled) copper futures contract.
The only available input data for this competition are:
The data can be called using the getTickersCopperChallenge function.
|LMCADY Comdty||OHLCV||LME Copper Cash Price|
|SPX Index||OHLCV||S&P 500 Index|
|USGG10YR Index||OHLC||US 10-year T-Note yield|
|DXY Curncy||OHLC||US Dollar Index|
No benchmark (your implicit benchmark is a cash position in US dollars).
Each time the weights are set, the following constraints must be satisfied (i.e. the constraints are not checked between 2 set dates):
Please also have a look at the payout pitfalls page for common issues faced by users.
Transaction costs: 1 basis point (bp) of the amount being transacted.
Transaction frequency: The maximum transaction frequency is daily (no intraday trades). All trades are executed at market close prices.
Transaction signals: Transaction signals must be based on data available at close-of-business on the day prior to the execution. Signals are 'executed' 1 day after they are generated. Please have a look at this page for more information on our '1-day lag convention'.
Rebalancing penalty: 2 basis points on the total AUM, each time you have a date with a set of weights, it will be considered as a 'rebalancing' day and you will incur the penalty. Please check the example notebook and check the page Rebalancing and transactions costs
The in-sample period runs from 1 Jan 2003 to 31 Dec 2018. To prevent any overfitting of the models, data for 2016-2018 will only be unveiled after your first model submission.
Note: Once your first submission is approved, you can revise it as much as you want.
You must use Notebook to submit your solution. You can only submit one notebook. However, there is no limitation in the number of revisions you can make on a submitted notebook. If the solution follows a theoretical or academic paper, the participants are encouraged to attach the document with the submission, any relevant document (own paper or other document) to explain the approach used will increase the robustness scoring.
Please visit our Submissions page for all details on how to submit.
The strategies will be ranked based on the weighted arithmetic mean of their following two rankings:
|Performance Metrics||Metric ranking||Weight|
|Minimum Rolling Sharpe Ratio (*)||MRSR||25%|
(*) The Minimum Rolling Sharpe Ratio will be calculated over a period of 3 years.
The winner(s) will receive either:
an iPad Air 64GB WIFI (team of one person), or
an Apple Watch model SE GPS 40 mm per team member (teams of 2 or 3 members).
Wednesday 03, march 2021.
Wednesday 14, April 2021.
The Challenge will be open to any Participants (academic or non-academic) in the world.
Weekly point rewards
The Challenge will be open to any Participants (academic or non-academic) in the world, but Alphien reserves the right to reject some applicants if terms of the platform are violated. In particular, you must not copy code or intellectual property which is not your own or is not open sourced. You can not participate as a professional if your employer can claim ownership in any part of your work on the Alphien platform; in case of conflict please contact and discuss with the Alphien team. Alphien is open to free scientists who own their intellectual property.