Hi, looking through the Hurst=>Correlation=>P-Value analysis, I understand the fundamental steps. However, upon looking at the graphs of returns, every one of them that the class generates code for is negative, but the cumulative returns are positive. Can you please explain the 'returns' graphs in red…is that indeed showing a negative return from all of the top ranking asset classes? All of the red graphs start at 0 and trend downward, showing negative returns.
thanks,
Jon
The graph in red represents the drawdown in the strategy. Drawdown is a decline in investment from peak to trough over a specific period. In the crude oil drawdown graph in the notebook, you can see that strategy falls to approximately 66% from the peak and that is the maximum drawdown of the strategy.
Reference: https://quantra.quantinsti.com/glossary/Maximum-Drawdown