Quarterly Paired Switching Between Equity and Bond Funds

Summary

This strategy rotates between an equity fund and a government bond fund by comparing their returns over the prior quarter. At each quarterly decision point, it invests fully in whichever asset had the higher return during the ranking period, then holds that choice until the next quarterly review. The accompanying algorithm example uses daily data and switches between broad equity and aggregate bond ETFs, while the comments describe a related research example using Vanguard funds.

The method is a relative-momentum approach across two assets, intended to exploit changing leadership between stocks and bonds. The code does not include a risk target, diversification beyond the selected fund, or an explicit stop. The document supplies implementation logic but no backtest results, benchmark comparison, or transaction-cost analysis. Its example also computes return using the ending price as the denominator, which differs from the conventional beginning-price denominator and may affect rankings. Results would depend on the asset pair, historical window, review timing, and implementation details.

Key ideas

• The strategy ranks two assets by their returns over the prior quarter.
• It holds the higher-return asset and repeats the comparison quarterly.
• The example implements the rotation with equity and bond exchange-traded funds.
• The approach is relative momentum and does not specify a broader portfolio or risk-control framework.
• The code’s return formula and lack of reported tests limit what can be concluded from the example.

Tags

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