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PSI5 Mean-Reversion Strategy Performance in Weekly SPY ETF

The PSI5 mean-reversion strategy has outperformed on rick-adjusted basis the buy and hold total return performance of SPY since inception.

The PSI5 mean-reversion strategy is not data-mined but based on a formula from a text in probability theory. The logic of this strategy is available for sale to professional traders and hedge funds subject to acceptance of a non-disclosure agreement. The strategy has  been also effective in trading portfolios of large cap stocks in both daily and weekly timeframes.

PSI5 strategy in weekly SPY ETF

Time-frame: Weekly (adjusted data)
Strategy type: Long-only
Market: SPY
Backtest period: 01/29/1993 – 12/03/2019
Commission per share: $0.01
Position size: Fully invested
Position entry and exit: Open of next bar
Bear market filter: Yes

Strategy performance

Parameter Strategy Buy and Hold Total Return
CAGR 8.1% 9.7%
Max. DD -14.7% -54.6%
Sharpe 0.94 0.58
MAR 0.55 0.18
Win rate 75.1%  –
Trades 265  –
Profit factor 2.52  –
Avg. bars in trades 2.6  –
Exposure 30% 100%

The strategy has outperformed buy and hold on risk-adjusted basis. Maximum drawdown is less than 15% and win rate is more than 75%.

Equity curve with month returns table

 

The strategy backtest shows only two losing years in 2002 and 2011 with small negative returns. Year-to-date return (12/06/2019) is about 12%.


Charting and backtesting program: Amibroker

Data provider: Norgate Data

Technical and quantitative analysis of major stock indexes and 34 popular ETFs are included in our Weekly Premium Reports. Market signals for position traders are offered by our premium Market Signals service

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