The Dilemma

Should you estimate signals once across all assets, or separately for each portfolio with different constraints?

Recommendation: Unified Estimation, Per-Portfolio Optimization

Signals estimated on full universe:

• Maximum statistical power
• Consistent signal definitions
• Reduces data mining

Each portfolio optimizes separately:

• Respects specific constraints (e.g., factor-neutral)
• Different risk appetites
• Custom rebalancing frequencies

Risk Model Considerations

• Use realized covariance with appropriate half-life (21-63 days typical)
• Overlay regime-dependent scaling for tail risk
• Factor models useful for large universes but not essential for 50-100 futures

Single-Book vs Multi-Book

Single-book (recommended):

• All signals in one portfolio
• Transaction cost penalty naturally handles horizon-appropriate rebalancing
• Simpler infrastructure

Multi-book (only if needed):

• Very different rebalancing frequencies required
• Significantly different constraints
• Separate risk limits