Intraday Mean-Reversion Rotation Among China’s Four Largest Banks

Summary

The strategy rotates among China’s four largest banks using each stock’s current price relative to the previous close. When flat, it buys the bank with the weakest ratio if the spread between the strongest and weakest ratios exceeds a preset threshold. When holding a bank, it switches to the weakest one if the gap between its ratio and the weakest ratio crosses that threshold. The author describes minute-level backtesting and frames the method as a short-horizon, long-only relative-value approach: buy recent underperformers and rotate away from stronger peers.

The rationale is that the banks have similar characteristics and may show short-term relative reversion. However, the article gives no numerical backtest results or evidence of live performance. It explicitly notes that slippage may matter, particularly given the stocks’ low prices, and that frequent turnover can raise commission costs. Its apparent edge depends on the relationship persisting after these costs; the short rebalancing horizon also makes execution assumptions and data timing important when evaluating the backtest.

Key ideas

• The strategy compares each of four bank stocks’ current prices with their previous closes.
• It buys the weakest relative performer when the spread exceeds a preset threshold.
• When already invested, it rotates to the weakest bank if the relative gap is large enough.
• The approach assumes short-term relative mean reversion among similar bank stocks.
• Slippage and frequent-trading commissions may erode returns, and no live results are reported.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.