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
-27%
Volatility
40%
CAGR
234%
Sharpe Ratio
3.24
Max Drawdown
-20%
Volatility
31%
CAGR
143%
Sharpe Ratio
3.02
Max Drawdown
-23%
Volatility
34%
CAGR
145%
Sharpe Ratio
2.79
Max Drawdown
-28%
Volatility
38%
CAGR
185%
Sharpe Ratio
2.98
Max Drawdown
-21%
Volatility
31%
CAGR
108%
Sharpe Ratio
2.55
Max Drawdown
-31%
Volatility
44%
CAGR
221%
Sharpe Ratio
2.88
Max Drawdown
-29%
Volatility
43%
CAGR
215%
Sharpe Ratio
2.87