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
58%
Sharpe Ratio
1.69
Max Drawdown
-15%
Volatility
20%
CAGR
33%
Sharpe Ratio
1.52
Max Drawdown
-23%
Volatility
25%
CAGR
30%
Sharpe Ratio
1.17
Max Drawdown
-18%
Volatility
30%
CAGR
57%
Sharpe Ratio
1.65
Max Drawdown
-23%
Volatility
32%
CAGR
46%
Sharpe Ratio
1.32
Max Drawdown
-22%
Volatility
35%
CAGR
60%
Sharpe Ratio
1.53