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
-29%
Volatility
33%
CAGR
55%
Sharpe Ratio
1.50
Max Drawdown
-19%
Volatility
19%
CAGR
17%
Sharpe Ratio
0.93
Max Drawdown
-26%
Volatility
23%
CAGR
21%
Sharpe Ratio
0.96
Max Drawdown
-30%
Volatility
29%
CAGR
18%
Sharpe Ratio
0.73
Max Drawdown
-34%
Volatility
34%
CAGR
29%
Sharpe Ratio
0.93
Max Drawdown
-32%
Volatility
37%
CAGR
40%
Sharpe Ratio
1.09