Cross-Sectional Reversal (L/S)
Mean reversion · Market neutral · Equity ETFs · Daily
The rules, in plain English
This is the opposite bet to momentum: each week it buys last month's losers and shorts last month's winners, expecting a short-term reversal. Reversal and momentum can both sound convincing, which is exactly why testing matters. In the published backtest this one lost a small amount of money.
The published backtest
| Total return | -1.7% |
|---|---|
| CAGR (annual growth rate) | -0.07% |
| Sharpe ratio | -0.24 |
| Maximum drawdown (worst peak-to-trough fall) | -33.7% |
| Win rate | 47.5% |
| Profit factor | 1.00 |
| Risk grade (our shorthand, from the published figures) | F |
| Asset class | Equity ETFs |
| Style | Mean reversion · Market neutral |
| Timeframe | Daily |
| Type | Weights |
— means no figure was published for this strategy. Ungraded and workflow entries publish diagnostics rather than a graded portfolio backtest, so some metrics are not published for them.
Honest verdict
Lost money in backtest
Plainly: this one lost money in its published backtest. Whatever the appeal of the idea, the published test ended with less money than it started with — so as tested, it did not work.
Worst drawdown in the published test: -33.7% — at its lowest point, a follower of this test would have been down that much from the peak before any recovery.
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Attribution: strategy and published backtest results from the QuantJourney open-source library (Apache-2.0), via quants.md — published backtest results by QuantJourney, reproduced with attribution. Results are hypothetical backtest results based on historical data; they are not live trading results and do not guarantee future performance. Educational content only — not financial advice, and not a recommendation to buy, sell, or hold any security.