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
39%
CAGR
226%
Sharpe Ratio
3.22
Max Drawdown
-18%
Volatility
30%
CAGR
140%
Sharpe Ratio
3.11
Max Drawdown
-22%
Volatility
33%
CAGR
137%
Sharpe Ratio
2.76
Max Drawdown
-27%
Volatility
38%
CAGR
199%
Sharpe Ratio
3.08
Max Drawdown
-30%
Volatility
43%
CAGR
227%
Sharpe Ratio
2.95
Max Drawdown
-28%
Volatility
43%
CAGR
222%
Sharpe Ratio
2.95