ETF Relative Strength Backtest

Feb 16, 2024 in Backtest, Relative Strength, RS Composite

The ETF Relative Strength backtest, which is free to use, now offers the option to backtest either regular 3-Factor RS models or Relative Strength Composite models.

With Relative Strength Composite, rather than relying on a single lookback period for relative strength, you can diversify across a range of RS lengths and thereby protect against parameter choice misfortune.

i.e. though a particular lookback may have historically outperformed other lookback lengths, there's always the possibility that it may underperform in the future.

The RS composite model reduces that risk by stepping through the lookback periods, from your chosen minimum to maximum, and invests in the top (strongest) of the 3 securities from each of those.

In the example below the minimum RS length is 3-months, the maximum is 12-months and the step value is 1. This means that, each month, the backtest will invest 10% in each of the:

• Top ETF from QQQ, MDY and SPY ranked by 3-month total return
• Top ETF from QQQ, MDY and SPY ranked by 4-month total return
• …5-month total return
• …6-month total return
• …7-month total return
• …8-month total return
• …9-month total return
• …10-month total return
• …11-month total return
• Top ranked ETF from QQQ, MDY and SPY ranked by 12-month total return

click image to view full size version

If QQQ ranks top for all 10 of those specified RS lookback periods, then 100% will be invested in QQQ.  If SPY ranks top for 11 and 12-month returns and QQQ for the others, then 80% will be invested in QQQ and 20% in SPY. etc etc.

The step value can be increased to determine whether it is possible to obtain sufficient diversification without needing to employ every RS length. For instance, raising the step value to 3 in the above example will mean the backtest ranks QQQ, MDY and SPY by 3, 6, 9 and 12-month returns each month and invests 25% in the top ranked security from each of those. 

To backtest just 6 and 12-month RS lengths, set RS Length Min to 6-months, Max to 12-months and Step to 6. The backtest will then, each month, rank QQQ, MDY and SPY by 6 and 12-month returns and invests 50% in the top ranked security from each. 

Go to the ETF Relative Strength backtest

Not a subscriber? Subscribe

Note:

1. All returns on ETFreplay are Total Return, which accounts for price appreciation and the receipt and reinvestment of dividends (and any other distributions, such as capital gains distributions). See Total Return vs Price Return

2. Subscribers, when logged in, have the option to switch from backtesting relative strength to mean-reversion and are not restricted to the 11 symbols provided for ETF 1, 2 and 3.  Annual subscribers (regular and pro) also obviously have access to the fully fledged portfolio RS Composite backtest.

What was the S&P 500 Total Return for 2023?

Jan 01, 2024 in Total Return

The chart below displays the 2023 Total Return for a few different types of S&P 500 ETF (growth, value, market-cap weight, equal weight and low volatility):

click image to view full size version or go to the chart page

To put the performance of the market-cap-weight S&P 500 into global perspective, the below chart and table shows 2023 Total Return of SPY alongside a selection of developed international and emerging market country funds.

click image to view full size version

note:
Total Return accounts for price appreciation and the receipt and reinvestment of dividends (and any other distributions, such as capital gains distributions). See Total Return vs Price Return

Backtest start end options

Nov 07, 2023 in Backtest

Subscribers can now set specific start and end dates on all portfolio Relative Strength, Regime, Ratio MA, Moving Average and Channel backtests.

All the backtests still allow you to simply set the start and end year, if so desired. But, it is now also possible to choose a custom start and / or end date, as per the example below:

Note: if the specified start date is not a valid rotation day, the backtest will start on the chosen day and will invest in the picked securities as of the rotation date that immediately preceded the specified start date.

For example:

If a monthly rotating Portfolio Relative Strength backtest has a chosen start date is Jan 10, 2023, the backtest will begin on Jan 10, 2023 and will invest in the top x ranked ETF(s) through Dec 31, 2022.

If a quarterly rotating Portfolio Moving Average backtest has a chosen start date is Nov 29, 2019, the backtest will begin on Nov 29, 2019 and will invest in ther ETF(s) that were above their MA through Sep 30, 2019 (and will invest in cash for those that were below).

etc. etc.

Import your own data

Sep 08, 2023

With a Pro Subscription it is now possible to import your own data series for use with any tool or backtest on the website.

To import your own data, click on the new Import Data link and then create a series by clicking on the 'Add Data Series' button. Enter a ticker symbol (a $ prefix is added automatically to any imported series) and give your data series a name.

To add data to a series, simply click 'Import' and choose the Excel file that contains your data. 

Note that:

• The Excel document must be a .xlsx file and the sheet must be named Sheet1 (no space) and contain 2 columns; Date and Value
• The data must be daily (U.S. trading dates only; non-valid dates will be ignored / omitted)
• The earliest allowable date is Dec-31, 1996
• The sheet should not contain any date gaps between the first date and the last date to be uploaded (other than market holidays and weekends)
• New data can be appended or backfilled, or existing data can be overwritten (see following note)
• Any existing data will be overwritten by newly uploaded data that has the same date

Up to 25 Imported Data series can be created and their symbols can be added to portfolios and therefore used with any backtest. Your Imported Data symbols are private; they can only be used by you. i.e. other subscribers cannot use them in charts or add them to a portfolio etc.

To edit or remove a series, click on its name in the Imported Data Series table.

Regular subscribers can upgrade to a Pro Subscription at My Account > Subscription Settings > Upgrade to Pro

Parameter Performance Summaries: Max Drawdown

Jul 28, 2023 in Drawdown, Parameter Summary

We have expanded the range of backtest statistics produced by the Parameter Performance Summaries with the addition of max drawdown.

The Parameter Performance Summaries make it possible to backtest numerous different parameter values in one go and assess the results.  The table of backtest results is ordered by total return by default, but can now also be sorted by max drawdown (Max DD) as well as by win percentage, parameter value etc.

The Parameter Performance Summaries are available to both regular and pro annual subscribers:

• RS Parameter Performance Summary
• Ratio Moving Average Parameter Summary
• ETF Moving Average Parameter Summary
• ETF Channel Parameter Summary
• TRD Parameter Performance Summary

As always, studying the guidelines that we published within the original Parameter Summaries announcement is highly recommended.