Historical Analysis (Snapshot Comparison Backtesting) - ETFs
In this post we'll be looking at the performance of all ETFs in both an uptrend or a downtrend.
Today, let’s look at how ETFs would have performed with our Ai Algo Model across both an uptrend and a downtrend of the market.
To compare, I took snapshots of the entire ETF market and then overlaid some of our Ai Algo criteria to see how things would have played out.
The way I like to use ETFs is for shorting the market. Shorting stocks is very risky given that a random stock can shoot up 100s of percentages without any reason, I prefer to play it safe and short ETFs. While on the long (buy) side, I always prefer stocks.
With that said, we’ll review how our “Strong Sell/Short” rated ETFs would have done during a particular trend.
The Analysis:
In the first report below, we see that the market was in a huge uptrend. The S&P500 represented by SPY was up 10.74% while the NASDAQ represented by the QQQ was up a huge 17.77%. During this time ETFs we rated as “Strong Sell/Short” were only up 1.46% which is an amazing outperformance, given that we are shorting the market.
Now, in looking at a downtrend, we see the following snapshot comparison. In this report, you’ll see that during this timeframe compared SPY was down -7.41% while the Nasdaq was down -7.43%. During this time the ETFs we rated as “Strong Sell/Short” was down -7.41% which is in line with the broader market.
In Summary:
The takeaway here is that when we short the market, in an uptrend (against us since we are shorting), we won’t be losing much but in a downtrend, we capture all the gains. This is an amazing approach to shorting the market and when combined with the long (buy) strategy for stocks, the returns are just incredible.
Hope you found this insightful :)
Thanks,
Sohin