Created

01/2022

Global Sector Rotation

Sector Rotation




Portfolio Overview



The Global Sector Rotation Portfolio leverages a relative strength momentum strategy to invest in the top three best-performing assets from a global sector ETF universe. This model selects assets based on multiple weighted lookback periods to determine the strongest-performing sectors, while also incorporating a risk control mechanism using a moving average on the Vanguard Total Stock Market ETF (VTI).

The portfolio is designed to maintain an equal weight allocation among the top-performing assets while utilizing a 15% stop-loss threshold for added risk management. If any asset falls below the 15% threshold or the regime risk control signals that the Vanguard Total Stock Market ETF is below its moving average, the allocation is shifted to iShares 7-10 Year Treasury Bond ETF (IEF) for safety.

The portfolio is rebalanced every two months based on end-of-month signals, ensuring the strategy remains adaptive to market conditions. The backtested results show that this approach delivers a balance of growth potential while protecting against downside risk during unfavorable market regimes.

StopLoss: A stop loss at each asset with a 15% threshold. If any asset gets stopped out, the cash will be invested in IEF until the next signal.

Rebalance: At Monthly Signal (within 5%, watch tutorial)




Summary of Statistics





Statistic

Portfolio

Benchmark 60SPY/40IEF

Annualized Return

10.85%

9.5%

Annualized Volatility

11.98%

9.9%

Max Drawdown (EOM)

-19.12%

-29.5%

Longest Drawdown

33 Months

40 Months

Best Month Return

13.35%

10.7%

% Profitable Months

62.7%

66.7%

Worst Month Return

-11.57%

-10.7%

Sharpe Ratio

0.83

0.5

Sortino Ratio

1.37

0.84





Growth of $10,000 (starting on Aug 2019)







Growth of $10,000 (starting on Dec 2007)








Drawdown Curve







Asset Universe








Positions / Month: (1-3)





Monthly & Annual Returns









Benefits

  • Momentum-Driven Selection: The portfolio consistently invests in the top three best-performing global sectors using a relative strength momentum strategy, ensuring that only the strongest sectors are included.
  • Risk Control through Moving Average: A moving average on Vanguard Total Stock Market ETF (VTI) acts as a regime filter, shifting investments into bonds (IEF) during periods of market weakness, and reducing risk in volatile conditions.
  • Equal Weight Allocation: The selected assets are equally weighted, preventing overexposure to any single sector while maintaining balanced exposure to the strongest-performing assets.
  • Stop-Loss Protection: A 15% stop-loss threshold for each asset provides an additional layer of protection, automatically shifting underperforming assets to bonds (IEF) to safeguard against significant losses.
  • Systematic Rebalancing: The portfolio rebalances every two months based on clear, predefined signals, ensuring consistent and disciplined adjustments that remove emotional bias from investment decisions.






TAA Portfolios by StatOasis