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
-18%
Volatility
30%
CAGR
60%
Sharpe Ratio
1.71
Max Drawdown
-15%
Volatility
22%
CAGR
48%
Sharpe Ratio
1.87
Max Drawdown
-23%
Volatility
26%
CAGR
46%
Sharpe Ratio
1.58
Max Drawdown
-19%
Volatility
31%
CAGR
70%
Sharpe Ratio
1.87
Max Drawdown
-23%
Volatility
26%
CAGR
32%
Sharpe Ratio
1.20
Max Drawdown
-23%
Volatility
32%
CAGR
48%
Sharpe Ratio
1.38
Max Drawdown
-22%
Volatility
35%
CAGR
74%
Sharpe Ratio
1.74