Predictive Strength
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Predictive Strength
Measures the asset's sensitivity to high yield corporate bond rates, captures the lead-lag relationship between the two assets.
High yield bonds and crypto both serve as barometers for global risk appetite. When credit spreads compress (indicating HY bond demand), it signals institutional capital flowing into speculative assets - a dynamic amplified by Bitcoin's maturation as a macro hedge against fiat debasement.
The "High Yield Bond Demand" factor sources data from market indices tracking high-yield corporate bonds. These inputs are normalized against historical averages to create a standardized index, where values above 1 indicate elevated demand relative to past trends and 0 signal subdued activity. The normalization process enables cross-period comparisons while capturing lead-lag relationships between asset performance and high-yield bond market conditions.
To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
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Predictive Strength