Dynamic Factor Strength Strategy | 17.9% CAGR, -24.1% MDD | High Risk
Welcome to Avalon QuantBrief, where we dissect sophisticated quantitative models to uncover actionable market insights. Today, we explore the Dynamic Factor Strength Strategy, an upgraded adaptation of the classic Dynamic Factor Timing model designed to capture factor momentum. While the strategy boasts an impressive historical return, its underlying volatility requires a careful look at the relationship between risk and reward. Backtest Summary (2017–present) 📈 CAGR: 17.9% 📉 Max Drawdown: -24.1% ⚡ Sharpe Ratio: 0.97 💰 Total Return: 414.2% 🎯 Universe: MTUM, QUAL, USMV, VLUE, IWF, IWD High Risk: Return Versus Risk The headline result of this strategy is an impressive 17.9 percent CAGR, but it also experienced a significant 24.1 percent maximum drawdown. This substantial drawdown places the strategy firmly in the high-risk category. In this briefing, we will break down the rules, analyze the return path, and examine the loss periods before arriving at a practical conclusion...