EdgeWare FastBreak Standard Version 5 - Manual (Page 21)

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If using money market in a ranking strategy, this menu item will allow you set a mini-
mum holding period for the money market fund before it can be sold. Many users like to
set this to a short value because money market funds usually do not have a minimum
hold period or short term trading fees. If you use a substitute fund in place of a money
market fund, remember that FastBreak does not apply any short term trading fees to the
money market. Note: The period is in calendar days not market days.
Maximum Correlation Check
This option allows a strategy to avoid buying and holding similar funds at the same time.
If the correlation option is checked, the fund under consideration for purchase will be
compared in correlation to the other funds currently held by the strategy. If the fund un-
der consideration is correlated greater than the specified value, then the fund will be re-
jected for purchase and the next highest ranked fund will be considered. The correlation
is calculated over a user defined period. We recommend that at least 50 trading days be
used for the calculation. Correlation can range from -1.0, negative correlation, to perfect
correlation of 1.0 Note: Many funds will become highly correlated over short periods
even though they may have low correlation over long time periods. For this reason the
correlation value should be set to a high value. A reasonable maximum correlation
value would be 0.9 or higher.
Statistics Index and Period
FastBreak calculates a variety of statistics on your trading system, including Beta and
Correlation. These statistics will be covered in the Output section of the manual. To cal-
culate some of these statistics, FastTrack requires an index to be specified. The default
index is the S&P 500 index (SP-CP in the FastTrack database). If you want statistics cal-
culated using a different index, you must specify the FastTrack symbol here. A period, in
market days, is required for the calculation. The default is 50 days. We don’t recom-
mend periods shorter than 50 days, but longer periods are certainly reasonable. Finally,
the user has a choice of calculating the beta using correlation, which is the traditional
method, or without correlation. When choosing Without Correlation, the beta calculated
isn’t actually beta, but is the ratio of the equity curve daily standard deviation and the in-
dex daily standard deviation.