EdgeWare FastGraph Version 3 - Manual (Page 45)

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10.0 Making Simulated Index Funds
Index fund investing has become very popular and some of the new index fund products
actually leverage the index. For example, the Rydex Nova fund actually attempts to beat
the S&P 500 Index by 50%. Other funds actually take an inverse approach to the index,
for example, the Rydex Ursa fund rises when the S&P 500 Index drops and declines in
price when the S&P 500 Index increases.
The problem for investors is that there is a limited amount of data because these funds are
relatively new. This lack of historical data prevents developing strategies in FastBreak
(and other products) that can be tested back to 9/1/88.
FastGraph allows you to create a simulated index fund that has the same length of his-
tory as the index you are using in the simulation. Note: This will be an approximation
that may be very good or very bad depending on a number of issues. You need to be
very careful in how you use this feature. Trading systems that spend a short time in
the simulated index fund will be affected much less than strategies that hold the simu-
lated index for very long periods of time because errors tend to compound over time.
FastGraph calculates the daily percentage change in the index to be matched, then multi-
plies this change a “beta” and applies the result to the simulated fund. For example, if
the S&P 500 increases by 1% on a given day and a beta of 1.5 is used the simulated fund
will increase by 1.5% on that same day.
To use the new feature first load the fund or index you want to "clone" into FastGraph.
For example, if you want to create a simulated Rydex Nova fund load the S&P500 (SP-
CP) from the FastTrack data base. Go to the Data Screen and select (highlight) the SP-
CP data column.
Calculations Screen
When you click this icon a new screen appears:
There is a small button on this screen that when clicked a menu appears that asks for the
name of the FNU file. Once you enter the file name and click OK, screens appear to in-
put a title description and symbol. You need to input a Beta factor that will be applied to
the imported index. For example, to make a Nova "like" fund use 1.5 as the beta multi-