Strategy - Global Equities Momentum (Canadian)

Overview

A simple strategy that switches between Canadian equities, global equities, and Canadian bonds based on dual momentum. Takes advantage of absolute momentum and relative momentum. Absolute momentum is the observation that, over certain lookback periods, an asset's previous returns can predict its future performance. Relative momentum is the observation that an asset's past performance relative to another asset can predict its future performance. Provided protection during bear markets by switching from a poorly performing asset class to a better performing one. In the past, it limited losses from downturns by switching from equities to bonds.

Past Performance

  • Relatively ineffecient in bull markets compared to Couch Potato strategies due to higher transaction costs and whipsaws in asset prices.
  • Higher returns, lower drawdowns, and better risk-adjusted performance compared to Couch Potato portfolios in recent market cycles (such as 2008-present).
  • Protection provided during downturns led to greater overall return, even with realtive underperformance in bull markets.

Source Information

Based on the strategy in 'Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk' by Gary Antonacci.

Trading Information

Low transaction costs as assets are generally adjusted only a handful of times a year.

Risk Level

High

Assets

Name Symbol
Canadian Aggregate Bonds ZAG.TO
Canadian Cash CMR.TO
MSCI World Index XWD.TO
S&P/TSX Capped Composite Index ETF XIC.TO

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Strategy Backtest

The information below shows how well this strategy performed in the past so that you can determine if it would be a good fit for you. The strategy backtest results are shown compared against the "Couch Potato - Balanced" benchmark strategy.

$10,000

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