Category Archives for "Rotation"

Weekly Mean Reversion Rotation Strategy on S&P500 Stocks

A reader emailed me about testing a weekly mean reversion rotation strategy on S&P500 stocks. My first thought was, why had I not done this type of test before? The very first strategy that I worked on with Larry Connors was this type of strategy. The strategy I will be testing today is a simpler version and different universe but how well will it hold up?

Basic Rules

Testing period is from 1/1/2007 to 10/31/2017.

Setup

  • Stock is a member of the S&P500 index
  • Stock is trading above its 200-day moving average
  • The SP500 index is trading above its 200-day moving average

Each weekend, take all the stocks that have setup and then rank using one of the mean reversion methods below. Buy top 5 that are most sold off. Hold 1 week and sell. Then buy the ones that are now the most sold off

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February 22, 2017

Country ETF Rotation – Reader’s Suggestions

My last post on Country ETF Rotation generated several ideas of what to test to improve the results. See the original post for the list ETFs being traded. One important test I left out from the original post was a baseline case. An idea applied to all the tests was trading more ETFS. For all tests, I will be showing results of trading (2,5,8) ETFs in the spreadsheet. Testing is from 1/1/2007 to 12/31/2016.

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January 25, 2017

Country ETF Rotation

My recent research has been focused on finding strategies that are not highly correlated with the S&P500 index. One of my most popular posts is ETF Sector Rotation. The idea for this post is to apply those concepts to a list of country ETFs. Would this produce decent returns that were not highly correlated to the S&P500 index? I would like to see the correlation under .50. What about adding a filter to not enter an ETF when it is highly correlated with the S&P 500?

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July 22, 2015

Multiple Time Frames for Scoring ETF Rotational Strategies

Today we have a guest post from David Weilmuenster who I worked with while at Connors Research.

A widely applied technique for scoring assets in rotational systems is to rank those assets by their price momentum, or return, over a given historical window and to rotate into the assets with higher momentum. This approach seeks to capitalize on the well-demonstrated tendency for price momentum to persist. But, it begs some questions:

  1. “What is an appropriate historical period for measuring price momentum?” Clearly, the momentum of a given asset can rank quite differently compared to the tradable universe over 1 month, 3 months, or 6 months.
  2. “Is one historical period sufficient?” If relative momentum can vary widely depending on the historical window, would it be better to consider multiple slices of history?
  3. Is higher momentum always preferable to lower momentum, especially if the system rules filter the tradable universe before scoring the ETFs for rotation?

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March 18, 2015

ETF Sector Rotation

My recent research has been in ETFs which I have not explored in several years. ETF sector rotation has always intrigued me. The idea seems so simple that it should work. Always be in the sector that has been doing the best. I like simple but does it work? If not, can we make it work?

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January 14, 2015

Using 52-week highs in a S&P500 monthly rotation strategy

One area of recent interest for me is trading rotational strategies on a monthly timeframe using S&P500 stocks and ETFs. Areas of exploration include Momentum and Dual Momentum. Recently I came across The Secret to Momentum is the 52-Week High??? on Alpha Architect, a blog I highly recommend on reading along with the quant mashup Quantocracy.. The article is a synopsis of research done comparing momentum vs. 52-week highs as ranking filters for a rotation strategy. A new idea I had not tried. What a great way to start the year, testing a new idea. Even though often they do not work out, one needs to be exploring all the time.

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December 17, 2014

Day of month pattern or luck for a monthly ETF rotation strategy?

From my post on Heikin-Ashi Charts, another researcher wrote Luck: The Difference Between Hired or Fired about how luck of the draw could account for the difference in returns depending on the starting date. This is a completely valid question. Are three better returns for a strategy in a particular area of the month or is it random? I do believe that luck plays a large part in our trading results, which is a future blog post. But from previous work on 5 day holds, I know that the end of the month and beginning on the month tend to be better times for ETF mean reversion.

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