Sector Relative Strength Rotation (3/6/12m vs SPY)

Strategy Card

Sector Relative Strength Rotation (3/6/12m vs SPY) — strategy card

Spec ID: spec-sector-momentum-rotation-etf-top50-1767027941 · Generated: 2026-09-24 23:38 UTC

Cluster: Momentum · Sub Cluster: Sector Etf Relative Strength Rotation

One-line description

Each month, the strategy ranks eligible sector ETFs by their relative strength versus SPY over 3, 6, and 12 months and targets the top three at equal weights.

Why this trade exists

Sector leadership can persist as earnings expectations, investor flows, and macroeconomic conditions adjust gradually. Comparing sector ETFs with SPY seeks to capture that persistence while emphasizing relative leadership rather than broad-market momentum.

Algorithm

[code omitted from public view] The specification requests a one-day signal lag and next-open trading; the recorded cost and execution convention instead identifies daily-bar market-on-close fills. The fill timing should be reconciled against the blotter before treating either description as the implemented entry rule.

Parameters

Param	Value	Notes
Universe	Top 50 ETFs by capitalization	Further restricted to sector ETFs using provider metadata or name matching; allowed sectors: GICS 11.
Backtest window	2018-01-01..2023-01-01	Daily bars.
Benchmark and lookbacks	SPY; 63, 126, 252 trading days	Relative strength defined as total_return(etf,LB)/total_return(benchmark,LB); composite is the mean z-score across lookbacks.
Eligibility	252 days of price history; no missing lookback; 63-day average volume ≥250,000 shares	Applied to candidate selection.
Rebalance and selection	Monthly, first trading day; top 3	Equal weight; minimum 3 positions; cash_if_fewer_candidates=false.
Exposure and risk	Gross leverage 1.0; maximum position weight 0.4; maximum sector allocation 0.4	No stop loss or volatility targeting.
Requested trade execution	next_open; signal lag 1 day; turnover threshold 0.0	Differs from the recorded platform-default MOC execution; verify actual fills.
Commissions	$0.0040 per share, minimum $1.00 per order, capped at 1.00% of trade value	Charged per fill by the results module; all metrics are net of them
Slippage	0 bps — not applied	Not an omission — MOC (market-on-close) fills at the auction print the backtest uses
Costs not modelled	short borrow fees / rebate, margin financing on leverage, market impact, exchange/regulatory/clearing pass-through fees, taxes	Excluded deliberately, not unknown

Look-ahead audit

#	Concern	Status
1	ETF universe and sector classifications are available as of each historical selection date.	⚠ Confirm point-in-time screening and metadata; the stated top-50 universe alone does not establish this.
2	Return, z-score, and volume inputs use only observations available when the signal is formed.	⚠ Verify timestamped inputs and the specified signal lag in the executed run.
3	Closing-price or closing-volume signals do not fill at that same day's open.	⚠ Reconcile the requested next-open rule with recorded MOC fills; any same-day-open fill using that day's close, high, low, or volume is a violation.
4	Candidates satisfy the full-history and missing-data rules at each rebalance.	⚠ Verify eligibility is evaluated historically rather than using future availability.
5	Commissions are reflected in performance.	✓ commissions $0.0040/share (min $1.00/order); slippage 0 bps — not applied

Caveats / known limitations

• The specified next-open execution and the platform-recorded MOC convention conflict; actual fill timestamps are needed to establish which entry rule produced these results.
• A historical top-50-by-capitalization screen or present-day sector classification could introduce selection bias unless both are point-in-time.
• The eligible sector subset of the 50-ETF universe may be small, limiting diversification and making the three-position target sensitive to classification and missing-history rules.
• The specified ratio of ETF to SPY total returns can become unstable when SPY's lookback return is near zero or negative; its implementation warrants inspection.
• This single 2018–2023 backtest does not establish robustness across other market regimes or sector universes.
• Market impact, exchange/regulatory/clearing pass-through fees, and taxes are excluded.

Results

The backtest returned 50.68% in total, with a 0.71 Sharpe ratio and a −22.45% maximum drawdown across 24 trades. Reported performance is net of charged commissions. These results suggest positive historical performance but leave meaningful drawdown and implementation-fidelity questions.

Run diagnostics

Recomputed here from the run's stored daily returns, because every annualized figure in the table above is derived from the LENGTH of that array (years = n / 252). Only total return and max drawdown do not depend on the row count, so when the recomputed and stored values differ by a common factor, those two are the numbers to trust.

Check	From the run's own returns	Note
Daily-return rows	1,259	1.00x the 1,260 trading days in 2018-01-01..2023-01-01
Distinct dates	1,259	one row per date
Date span	2018-01-02 .. 2022-12-30
Sum of daily returns	50.68%	matches the reported total return
Sharpe from these rows	0.71	stored 0.71
Volatility from these rows	14.28%	stored 14.28%
Max drawdown from these rows	-22.45%	stored -22.45%
Lowest the book stood	-4.46%	low-water mark, in units of starting capital
CAGR from these rows	8.55%	stored 8.55%

Backtest metrics snapshot

Metric	Value
Total Return	50.68%
Sharpe	0.71
Sortino	0.86
Calmar	0.38
Max Drawdown	-22.45%
Volatility	14.28%
Beta vs SPY	0.54
Win Rate	66.67%
Profit Factor	4.84
Total Trades	24
Symbols	50 (AGG, BIL, BIV, BND, BNDX, BSV, DIA, EFA, GLD, IEFA, +40 more)