Monthly Sector Rotation Using 12-Month Momentum

Summary

This strategy ranks a universe of ten US sector ETFs by their trailing 12-month rate of change. At each monthly rebalance, it selects the three strongest performers, assigns them equal portfolio weights, and exits holdings that no longer qualify. The implementation uses daily price data, a warm-up period to calculate momentum, and a custom fee model. It also sets leverage on the ETF securities, a material implementation choice when interpreting portfolio exposure.

The document provides an algorithm outline rather than reported performance evidence: it specifies a start date and initial cash but gives no backtest results, benchmark comparison, or risk statistics. It does not explain why the top three or the lookback period were chosen, and it omits details such as slippage and robustness checks. The approach is therefore a momentum-based allocation recipe, not evidence that the rotation rule is profitable or suitable for live trading.

Key ideas

• The strategy ranks ten sector ETFs by their trailing 12-month momentum.
• It selects the three highest-ranked ETFs and gives each an equal portfolio weight.
• Holdings are reviewed and rebalanced once each month.
• The code specifies leverage and a custom fee model, but reports no performance or risk results.
• The document does not provide robustness checks or explain the parameter choices.

Tags

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