I frequently get asked for updated tests on various strategies. Using Portfolio123 I ran a backtest on a Dual Momentum strategy from 1/1/2007 – 5/25/2016. The strategy is updated on Scott’s Investments monthly, the most recent update is here.
The strategy invests equally in one ETF from each of four baskets of ETFs/cash:
- Equities – VTI, EFA, or Cash
- Credit Risk – CIU, HYG, or Cash
- Real Estate Risk – VNQ, REM, or Cash
- Economic Stress – GLD, TLT, or Cash
The backtest below ranks each ETF on 12 month momentum and purchased the ETF with the highest 12 month momentum. The 12 month return of the ETF must also be positive in order for it to be purchased, otherwise cash is held.
Re-ranking every 4 weeks results in the following return statistics. No reduction is made for commissions or taxes: