Relative Momentum: Comparing Stock Returns with an Index

Summary

This strategy compares an asset’s return over a lookback period with the return of a chosen market index. It smooths the two return series with a configurable moving average and enters long when the asset’s smoothed return exceeds the index’s; it closes the position when the relationship reverses. An alternative mode compares the difference in returns with its own moving average. The method aims to favor assets showing stronger recent performance than the benchmark.

The document describes configurable lookback and moving-average choices, plus a BTC futures backtest setup on a 15-minute chart. It gives no performance statistics or evidence that the method produces excess returns. Its example uses a crypto swap benchmark, so the description of individual stocks versus a broad equity index does not match the published setup. The source also requests higher-timeframe index data with lookahead enabled, which can introduce future information into historical calculations. False signals, pullbacks, and parameter choice are noted risks; stop-loss or volume filters are suggestions, not demonstrated protections.

Key ideas

• The strategy compares asset and benchmark returns over the same lookback period.
• Moving averages smooth returns, with crossovers or relative-return comparisons driving entries and exits.
• The strategy can use several moving-average types and configurable lookback settings.
• The published example uses BTC futures and a crypto swap benchmark, rather than stocks and an equity index.
• No performance results are reported, and the higher-timeframe data request may create lookahead bias.

Tags

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