Summary

Short-Term Absolute Return (STAR) is a quantitative multi-signal strategy that leverages momentum and mean-reversion signals in US equity index futures. It trades the S&P 500 and Nasdaq 100 index futures with a liquidity-weighted allocation (60%/40%). Both markets are traded independently, and positions can either be long, flat and/or short. With an average holding period of less than three days, its net exposure varies from -100% to +100% (average just +27%). Its 5% peak margin-to-equity ratio makes STAR highly capital-efficient and easy to implement. In line with DFC's hallmark strategies, STAR has a positive two-sided return convexity, during significant upward and downward moves in equity and bond markets. This highlights its capacity to deliver absolute alpha with positively skewed returns. Launched on June 01, 2023, by August 01 it became an integral sub-strategy within the DFC Long Volatility Program. Another compelling application is pairing STAR with the DFC long (realized) volatility flagship, the Intraday Crisis Alpha (ICA) Program, reducing risk and amplifying returns. While the STAR one year live returns still show a conditional correlation of 0.39 on up- and 0.39 on down-days of the S&P 500 index, research suggests an evolution towards a negative correlation on index down days once STAR can showcase its uncorrelated, positive return contribution capabilities in times of severe markets stress.