Risk Overlays can help adjusting factor exposures based on shifting market regimes. They help downweight factors like when is negative, and substantially boost risk-adjusted returns in certain cases. There are two types:
Factor Risk Overlays: based on the factor's own past performance (endogenous)
Risk Regimes: based on overall crypto market performance and state (exogenous), like funding rates, etc.
Max Drawdown
-39%
Volatility
35%
CAGR
87%
Sharpe Ratio
1.95
Max Drawdown
-32%
Volatility
27%
CAGR
49%
Sharpe Ratio
1.60
Max Drawdown
-39%
Volatility
30%
CAGR
41%
Sharpe Ratio
1.27
Max Drawdown
-31%
Volatility
34%
CAGR
90%
Sharpe Ratio
2.04
Max Drawdown
-49%
Volatility
39%
CAGR
68%
Sharpe Ratio
1.54
Max Drawdown
-42%
Volatility
38%
CAGR
77%
Sharpe Ratio
1.70