CSCB Management’s Amaral On Evaluating Different Approaches To Systematic Portfolio Design

Most systematic traders accept diversification as settled. Spread your capital across sectors, trade uncorrelated markets, let the law of large numbers do the work. Jacob Amaral, Head of Quantitative Research at CSCB Management, used his Future Alpha 2026 presentation to ask whether that conventional wisdom actually holds up, and whether a concentrated, or could a multi-strategy approach on a single instrument just as well.

CSCB trades futures and derivatives within a family office, and Amaral’s team had the data to evaluate this. The team used 140 proprietary trading systems across 11 markets and seven usable sectors, with daily P&L streams mapped by market, sector, bar size, and trading hours. All systems were scaled to a 10 percent annualized volatility target so they could be compared. Energies and metals were running multiples of the realized volatility in stock indices or agriculture at the time, so the scaling was necessary.

The research compared two hypothetical portfolios. The first diversified across sectors: one system each on Bitcoin, crude oil, silver, and Treasury bonds. The second concentrated on a single instrument, with four distinct systems all on Nasdaq futures. Does breadth across sectors actually produce better outcomes than depth within one market?

The middle is the same. The tails are not.

The median Sharpe ratios of the two portfolios were nearly identical. On that metric alone, either approach could work.

But everything else was different. Pairwise correlations in the same-instrument portfolio ran at 0.015, about five times higher than the cross-sector portfolio’s 0.003. The left tail of the concentrated portfolio was fatter: bigger drawdowns, more variance, more exposure to market-dependent losses.