Monthly Rotation Among Equity Index ETFs by 20-Day Strength

Summary

This tutorial builds a multi-index rotation strategy using nine Chinese equity index ETFs as proxies for different market sectors. It ranks each index by its return from twenty sessions earlier to the latest close, then selects the strongest index if that return is positive. If every candidate is down over the measurement period, the strategy holds cash. The described implementation rebalances monthly, sells an existing holding when the selected index changes, and invests available cash in the new leader.

The article frames broad index coverage, a quantitative strength rule, rebalance frequency, and the number of simultaneous holdings as key design choices. It reports that its three-year backtest showed monthly rebalancing outperforming weekly rebalancing, but gives no numerical performance, risk statistics, benchmark comparison, or robustness checks in the supplied text. The strategy’s results may depend on the chosen ETF universe, return window, timing conventions, and transaction costs; the article does not evaluate these caveats.

Key ideas

• The strategy compares nine equity index ETFs to represent different market segments.
• It ranks candidates by their return over the preceding twenty sessions and selects the strongest positive performer.
• When all candidates have negative returns, the strategy moves to cash.
• The described strategy rebalances monthly and holds at most one index ETF.
• The article reports better three-year backtest performance for monthly than weekly rebalancing, without detailed metrics or robustness analysis.

Tags

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