A watchout with ratio adjustments (RA):
- useful when calculating % returns, roll yields or other multiplicative measures
- resulting in different signals when running the same ATS on it again (backtesting results will differ)
?
For completeness, one can calculate rollover also like this:
- by date no adjustment
- by volume (front < back) no adjustment
- by date backadjusted BA (front settlement - back settlement)
- by volume backadjusted BA (front settlement - back settlement)
?
The BA data (not available on TWS) is suitable for additive measures (net profit, draw down) and remains stable for backtesting (up to a constant offset). The ratio data is suitable only for multiplicative measures (returns, standard deviation of returns, TWRR/CAGR, etc.) - you cannot add profit from trade A in $ with profit from trade B a few months ago. Also, obviously one cannot have a buy on one side of an RA and the corresponding sale on the other side (this is true for BA also).
