Spiders, the Finale

Buying everything that worked

Over the last few weeks, we’ve been looking at different ways to trade the S&P 500 Sector SPDRs (Spiders.) We started with using the Efficient Frontier to make the allocation decision for us in our first post:

StockViz
Spider Hunting
At StockViz, we are big fans of diversified portfolios. While investing in international funds have gathered traction lately, Indian investors continue to be under-diversified. We have been beating the drum for having international funds in your portfolio for a while now…
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Then, we looked at buying the best performing sector over different time-frames.

StockViz
Rotating Spiders
Last week’s post introduced the S&P 500 Sector Spiders and presented a backtest of a simple strategy (that didn’t work.) This week, we outlined a simple momentum-based rotation strategy that also didn’t work. Worse, it worked before 2010 and stopped working after that. So, if you were unlucky enough to run this backtest 10 years ago, you would’ve watched…
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Then, we tried buying the worst performing sector.

StockViz
The Dogs of Spiders
Over the last couple of weeks, we’ve been looking at different ways to trade the S&P 500 Sector SPDRs (Spiders.) We started with using the Efficient Frontier to make the allocation decision for us in our first post: Then, we looked at buying the best performing sector over different time-frames…
Read more

None of them worked.

This week, we tried buying all sector ETFs that had a positive return.

The results were a bit mixed. There is a set of backtesting specs that would’ve allowed one to hit the right note. Check it out here and see if you can visualize it.

Links

INVESTING; Humbling Lessons From Parties Past (2000) NYT

And after the initial public offerings, day traders rapidly exchange Internet shares as if they were Pokemon cards for adults.

But the rules of valuation have not changed. Stocks are only worth the present value of the cash flows they are able to generate for the benefit of their shareholders.

On backtesting and developing systematic trading strategies (2017) (PDF)

The Momentum Factor is Driven by Behavioral Bias, Not Risk (2021) (AA)

Meme of the Week

Earnings season was in full swing and some of the meme stonks had it rough.