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PSI5 Mean-Reversion Strategy Performance in SPY ETF

The PSI5 mean-reversion strategy has outperformed SPY buy and hold performance since inception.

Our PSI5 mean-reversion strategy is not data-mined but based on a formula from a text in probability theory. The strategy has  been also effective in trading portfolios of large cap stocks in both daily and weekly timeframes.

PSI5 strategy in SPY ETF

Time-frame: Daily (adjusted data)
Strategy type: Long-only
Market: SPY ETF
Backtest period: 01/04/1993 – 12/17/2019
Commission per share: $0.01
Position size: Fully invested
Position entry and exit: Open of next bar

Strategy performance

Parameter Strategy Buy and Hold
CAGR 9.6% 9.7%
Max. DD -22.6% -55.2%
Sharpe 0.69 0.53
Win rate 66.7%  100%
Trades 1026  1
Profit factor 1.60  –
Avg. bars in trades 3.9  –
Exposure 44% 100%

The strategy has outperformed buy and hold on both absolute and risk-adjusted basis.

Equity curve with monthly returns table

 

The strategy has recovered in 2019 from the 2018 drawdown. Note that in 2008 and 2011 the strategy had positive performance.


Charting and backtesting program: Amibroker

Data provider: Norgate Data

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