I am currently backtesting a mean reversion strategy which manages many pairs at the same time.
From a Realized Pnl perspective it doesn't look so bad. For me, "Realized Pnl" means the actual amount I recieved on my cash account from closing positions.
But I am worried about the "Current Trade Pnl" chart. Like the name says, it is the Pnl Sum of all open positions I hold:
It does not look so good. But I am actually having a hard time to correctly interpret the meaning and significance of the chart. Since this is a mean reversion strategy with a market neutral approach, I only close positions when the current price diff of a pair shoots back to the mean and exeeds it by the same threshoold in the other direction (using zScore Normalization).
Which results most of the time in a positive Pnl.
So what happens to that poor Current Trade Pnl chart is that all the nice positions closing with a positive Pnl get continously subtracted from it, leaving the chart with only the not-so-good (yet) negative Pnl positions.
So how should I interpret and weight the significance of this chart?
To give a complete picture, I also want to show the Actual Pnl chart. It is the combined Pnl of the two charts above and shows my actual pnl line:
Submitted October 25, 2020 at 03:57AM by flotschie