We recently published a new short-term rotation strategy within The Machine suite of products. This quantified high-probability mean reversion trading strategy is based on comprehensive market behavior analysis conducted by Connors Research over the last decade.
This strategy attempts to identify stocks that have a high statistical probability of being under-valued (i.e. over-sold) in the short term. In addition, the strategy may increase its cash exposure if market conditions indicate (based on a quantified risk management model) that the market could become more over-sold in the short term.
Unlike other trading systems that may limit the user to a single variation of setups, The Machine allows users to select their own custom variations of this strategy with a variety of options, including but not limited to:
- Trading Day of the Week
- Universe of Stocks: S&P 500 or low volatility stocks
- Number of unique setups per trading day: 10, 15 or 20
Additionally, users can sort by a number of available performance and risk metrics including Compound Annual Growth Rate, Sharpe Ratio, Maximum Loss or Drawdown, Average Profit/Loss per trade, or Success/Win Percentage to find the variation that is right for their personal trading style or philosophy.
Below is just a sample of some of the best performing variations over the last one year period:
For those looking for more statistical information about the recent hypothetical performance of these strategies, the following table provides the average performance of the top 50 variations, sorted by Sharpe Ratio, for the trailing last 5 year period as well as the average compound annual return for the trailing 1, 3, 5 and 10 year periods through March 31, 2012*:
* Some variations may have performed better than these averages and some worse.
The Machine also allows users to look at more detailed statistics of how individual variations might have performed over any 1 month to 10+ year time period since January 2001 by utilizing its Portfolio tool.
The following charts and statistics below provide the hypothetical performance of a single variation from January 2010 to May 2012. The Machine also provides users with the ability to compare their portfolios to performance benchmarks such as the S&P 500.
Click here to learn more about The Machine and a variety of quantified high probability trading strategies developed by Connors Research today.