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
232%
Sharpe Ratio
3.23
Max Drawdown
-20%
Volatility
31%
CAGR
142%
Sharpe Ratio
3.01
Max Drawdown
-23%
Volatility
34%
CAGR
144%
Sharpe Ratio
2.78
Max Drawdown
-28%
Volatility
37%
CAGR
182%
Sharpe Ratio
2.96
Max Drawdown
-31%
Volatility
44%
CAGR
218%
Sharpe Ratio
2.86
Max Drawdown
-29%
Volatility
43%
CAGR
212%
Sharpe Ratio
2.85