Jan 02, 2025
in RS Composite
With any parameter based model the risk always exists that a single particular value will underperform in the future, even though it performed well in backtests.
Below is the Parameter Summary of a Relative Strength model that invests in the strongest (i.e. top 1) security from a list of 4 U.S. equity ETFs (QQQ, SCHD, SPYG and SPYV). For the 10-years through 2023, the highest Total Return was produced by the 2-month lookback length.
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During 2024, however, the 2-month lookback was the second worst performer.
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The RS Composite method, which we introduced in early 2023, hedges against this uncertainty by diversifying across a range of parameter values. For example, below is an RS Composite backtest where the minimum lookback length is 2-months, the maximum lookback is 12-months and the step value is 2. This means that, each month, rather than investing is just the top ETF ranked by 2-month returns, the composite backtest will invest 16.67% in each of the:
- top ETF from QQQ, SCHD, SPYG and SPYV ranked by 2-month returns
- top ETF ranked by 4-month returns
- …6-month returns
- …8-month returns
- …10-month returns
- top ETF ranked by 12-month returns
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As can be seen, whereas the 2-month single lookback strategy was comparatively underwhelming in 2024, the RS Composite model performed rather well.
For more, watch this video: Using Parameter Summaries and Composite Relative Strength
Notes:
- a composite model will always underperform the single best parameter value, but, as demonstrated, it avoids being exclusively in the worst performer.
- Studying the Parameter Performance Summary guidelines is always highly recommended
Oct 08, 2024
in RS Composite
We have upgraded the Core-Satellite, Core-Regime RS and Advanced RS Pro backtests.
Core-Satellite backtest
Annual subscribers, both pro and regular, now have the option to switch between employing 3-factor Relative Strength or RS Composite on the Core-Satellite backtest.
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For more detail on the difference between the 3-factor Relative Strength model and RS Composite, see Relative Strength: 3 Factor vs Composite
Core-Regime RS and Advanced RS Pro
For Pro subscribers, the option to switch between 3-factor RS and RS Composite is now also available on both the Core-Regime RS and Advanced RS Pro backtests.
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Sep 12, 2024
in Backtest
The load and save settings function on all relevant backtests now displays the date that each of the settings were last loaded.
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The last loaded dates will initially be empty / blank, but will update, from now on, as and when you load the backtests.
The Load Settings function is straightforward to use. Simply click the ‘Load Settings’ button in the top right corner of the backtest and then:
- to load a backtest, click on its name
- to delete the settings, click 'Delete'
- to cancel / close the window, click the X in the top right corner or click the ‘Cancel’ button underneath the table
- to sort the table, click the column heading
To save your backtest settings:
- Click the ‘Save Settings’ button in the top right corner of the backtest
- Enter a new name for your settings, or, select a name from the table to overwrite existing settings
- Click ‘Save’
Regular subscribers can save up to 5 sets of settings per backtest. Pro subscribers can save up to 20 per backtest.
Jun 20, 2024
in Moving Average, Dashboards, Timeline
Q. "How can I check for moving average crossovers on the ETFs in my portfolio each month?”
A. To monitor a moving average model you can use either the Portfolio MA Timeline or set up a Dashboard.
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While the Timeline’s main graphic displays the invested history of each security in the portfolio, the far right column of the data table shows how near / far each ETF currently is from the chosen MA. As it gets closer to the end of the month, this can be used to estimate the likely positions for the following month. Clicking on the percentage value in that column will produce a pop-up window that displays a chart of the ETF and its moving average.
Alternatively, rather than using the Timeline, you can create a Dashboard and then add :
- MA List - displays the vs MA % for each ETF in your portfolio.
- MA Chart - vs MA % will be displayed on the chart
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See: Introducing Dashboards: A Way To Help Organize Workflow In Research & ETF Portfolio Backtesting
Notes:
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Moving Averages on ETFreplay are calculated using Total Return. i.e. the calculation does not just use closing prices but also accounts for the receipt and reinvestment of any dividends and distributions. The MA is then compared to the Total Return value of the ETF, so that it's like-vs-like; everything is Total Return, not just price. See the FAQ How are moving averages calculated?
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Timelines are also available for Portfolio Ratio MA and Channel models.
Apr 26, 2024
in Regime Change, RS Composite
We have added an RS Composite option to the Regime Relative Strength backtest.
Annual subscribers (both pro and regular) can now switch from using regular 3-factor RS models to RS Composite models by turning on the RS Composite option.
click image to view full size version
For more detail on the difference between the 3-factor Relative Strength model and RS Composite, see Relative Strength: 3 Factor vs Composite
Go to the Regime Relative Strength backtest