A long-short mean-reversion strategy for trading a portfolio consisting of SPY, QQQ, and TLT ETFs. Updated on September 22, 2023.
The strategy rules are available for sale. Contact us for details.
For all backtests in this article we used Norgate data. We highly recommend this data service (we do not have a referral arrangement with the company.)
Timeframe: Daily (adjusted data)
Markets: SPY, QQQ, TLT
Strategy type: Long-short mean-reversion
Maximum positions: 3
Position size: equity/3
Commission: $0.005/share
All trades are executed at the open of the next bar
Backtest range: 01/2/2003 –09/22/2023
The strategy is not optimized for the highest annualized return.
Equity curve
Performance Summary
| STRATEGY | |
| CAGR | 5.7% |
| MDD | -15.2% |
| VOLATILITY | 9.5% |
| SHARPE | 0.60 |
| TRADES | 1044 |
| LONG TRADES | 756 |
| SHORT TRADES | 288 |
| AVERAGE TRADE | 0.36% |
| PROFIT FACTOR | 1.46 |
| WIN RATE | 67.2% |
| AVG. BARS IN TRADE | 8.2 |
| EXPOSURE | 45.3% |
The strategy’s CAGR is 5.7%. The maximum drawdown of the strategy is 15.2%. The Sharpe of the strategy is 0.60 versus 0.34 for buy and hold in the same period. The volatility of the strategy is 9.5%. The average holding period is 8.2 days. The win rate is 67.2%.
Two ETF positions may also be held. In this case, the CAGR increases to 7.8%, but the maximum drawdown and the volatility increase to 21.1% and 13%, respectively.
There have been six down years in the test period, with 2004 down the most at -5%. In 2008, the strategy was up 7.5%, and in 2022, it gained 17%.
The strategy rules are available for sale. Contact us for details.
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Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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