Risk vs. Return for the NBA and CTAs

The Freakonomics blog is always on our radar, as they post about interesting statistical measures and relationships (always one of our favorite topics). Yesterday, a post about the recent NBA playoff series between the Miami Heat and the New York Knicks, in which they compared the shooting efficiency of Carmello Anthony and LeBron James, caught our eye:

Because Melo was a far less efficient scorer, he had to attempt 34 more shots from the field than LeBron in the series.  And because shot attempts are a finite resource, this means that other players on the Knicks had to attempt fewer shots… Such a story highlights an important lesson: scoring totals in the NBA can be quite deceptive.  A player can boost his scoring totals by simply taking more and more shots. But if this shooting is inefficient, teams actually suffer from this choice.

While we’re no fans of LeBron here in Chicago, and writing about basketball this close to the Bulls playoff exit is hard to swallow, emphasizing shooting efficiency rather than points scored hits close to home for us. We’re always harping on how investors shouldn’t fall in love with the returns of a program (how many “points” it has scored) without also considering the risk side (how efficiently the program scored those “points”).  It’s why we include risk factors such as downside deviation, drawdown, etc. (roughly 3 risk factors for every 1 return factor) in our managed futures rankings. Bottom line: if you’re only looking at who scored the most points, you’re missing out on who the best player to help you win championships might be.

Maybe NBA reporters will read Freakonomics’ advice and take a page from the book of managed futures – using risk-adjusted scoring numbers instead of just how many times a player scored (ignoring how many shots they put up, how many points scored by the man they were guarding, etc). But we won’t hold our breath… or even be watching now that the Bulls are home for the summer.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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