RSRS Timing and Large-Cap versus Small-Cap ETF Rotation

Summary

This strategy uses the range-based RSRS indicator to time exposure and rotate between large-cap and small-cap Chinese equity ETFs. It fits a rolling ordinary least squares regression of daily highs on lows, standardizes the recent regression slope, and multiplies that score by the regression’s coefficient of determination. The adjustment is intended to reduce the influence of slopes from poorly fitting regressions.

The rules open a position when the indicator rises above a positive threshold and exit when it falls below the corresponding negative threshold. Between those boundaries, the strategy switches to whichever of the two ETFs has the stronger RSRS reading. The document reports a backtest from April 2013 through June 2017 with 30.75% annualized return, 25.18% maximum drawdown, and a 62% win rate, compared with 9.78% annualized return for the benchmark. These are historical results only; the source provides no details on costs, slippage, or out-of-sample validation, and its original industry-index implementation was replaced by ETF proxies.

Key ideas

• RSRS is calculated by standardizing a rolling regression slope of highs on lows and weighting it by the regression fit.
• A positive threshold triggers entry, while crossing the negative threshold triggers exit.
• When neither threshold is crossed, the strategy rotates between large-cap and small-cap ETFs based on relative RSRS strength.
• The reported backtest covers April 2013 through June 2017 and includes return, drawdown, and win-rate figures.
• The results are historical and omit details about trading costs and out-of-sample validation.

Tags

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