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The Effects of Rebalanced Thresholds on Mean Daily Returns and Daily Return Standard Deviaion of A SPY/Cash Portfolio

This is a study on the effects of rebalanced threshold on mean daily reutns and the standard deviation. 

APP

SPY Ratio:%
Cash Catio:%

90% SPY with 10% Cash

Standard Deviation

Mean Return and Mean Over Standard Deviation

70% SPY with 30% Cash

Standard Deviation

Mean Return and Mean Over Standard Deviation

50% SPY with 50% Cash

Standard Deviation

Mean Return and Mean Over Standard Deviation

30% SPY with 70% Cash

Standard Deviation

Mean Return and Mean Over Standard Deviation

10% SPY with 90% Cash

Standard Deviation

Mean Return and Mean Over Standard Deviation

100% SPY

One thing I have noticed is the following data for a 100% SPY portfolio, the goal of rebalancing is to beat the 100% SPY portfolio:
  • Mean daily return: 0.04394%
  • Daily return standard deviation: 1.1873%
  • The mean return divided by the standard deviation: 0.037.
The following is some of the highest numbers for mean daily return over standard deviation. More importantly, they are higher then 0.037 of the 100% SPY portfolio,
  • The mean return divided by the standard deviation of 0.04089 from a 60% SPY/40% cash portfolio with a rebalancing threshold of 14.8%.
  • The mean return divided by the standard deviation of 0.04034 from a 50% SPY/50% cash portfolio with a rebalancing threshold of 17.4%.
  • The mean return divided by the standard deviation of 0.04038 from a 50% SPY/50% cash portfolio with a rebalancing threshold of 28.1%.
  • The mean return divided by the standard deviation of 0.04097 from a 40% SPY/60% cash portfolio with a rebalancing threshold of 30.3%.
  • The mean return divided by the standard deviation of 0.04152 from a 30% SPY/70% cash portfolio with a rebalancing threshold of 30.3%.
  • The mean return divided by the standard deviation of 0.04209 from a 20% SPY/80% cash portfolio with a rebalancing threshold of 27.1%.
  • The mean return divided by the standard deviation of 0.04238 from a 10% SPY/80% cash portfolio with a rebalancing threshold of 18.2%.

Conclusion

  • Generally, the bigger the rebalanced threshold, the bigger the daily return standard deviation.
  • Generally, the bigger the rebalanced threshold, the bigger the mean daily return.
  • Mena return over return standard deviation has no strong coorlation with rebalanced thresholds.
  • Overall, that you rebalance your SPY/Cash portfolio frequently with small thresholds generally means your portfolio is safer with a sacrifice of return.
  • The higher the percentage of cash in the portfolio, the easier to find a high value of mean return over standard deviation.
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