trendfollowing - QuantPedia

Alternative Market Signals: Investing with the Box Manufacturing Index

December 2, 2025

Investors are increasingly exploring alternative indicators to gain an edge in financial markets. Traditional signals, such as earnings reports or macroeconomic data, often come with delays or may already be priced in. As a result, unconventional metrics have attracted attention. In this article, we examine the Producer Price Index (PPI) for the Corrugated and Solid Fiber Box Manufacturing industry, including corrugated boxes and pallets. Our motivation is to evaluate this index’s effectiveness as a predictive signal for the S&P 500 ETF, sector-specific ETFs, and individual stocks such as Amazon (AMZN), one of the largest consumers of materials tracked by this index. We present several investment strategies that incorporate this indicator and assess whether it can enhance risk-adjusted returns.

Leveraged ETFs in Asset Allocation: Opportunity or Trap?

November 16, 2025

In this article, we explore whether it makes sense to incorporate leveraged ETFs into static and dynamic long-only asset allocation strategies. Leveraged ETFs promise amplified exposure to the underlying asset, offering the potential for significantly higher returns during favorable market conditions. However, this comes at the cost of much higher volatility, path-dependency, and the well-known issue of volatility decay, which can lead to substantial underperformance over longer periods. Our objective is to examine if — and how — leveraged ETFs can be systematically integrated into portfolio construction so that their benefits can be captured while mitigating their inherent risks.

How to Design a Simple Multi-Timeframe Trend Strategy on Bitcoin

November 13, 2025

Bitcoin is one of the most widely discussed financial assets of the modern era. Since its inception, it has evolved from a niche digital experiment into a globally recognized investment instrument with institutional adoption and billions in daily trading volume. Despite its inherent volatility, Bitcoin has demonstrated a strong long-term growth trajectory, making it an attractive candidate for trend-based and momentum-oriented trading strategies. In this study, we apply concepts from technical analysis to construct and refine a trend-following strategy for Bitcoin, progressing step by step from a simple MACD setup toward an improved multi-timeframe model.

Can Technology Sector Leadership Be Systematically Exploited?

October 16, 2025

The U.S. equity market has periodically been dominated by a few technology-driven stocks, most recently the so-called “Magnificent Seven.” Historically, similar dominance occurred during the Nifty Fifty era in the 1960s–1970s and the dot-com boom in the 1990s. These periods of concentrated leadership often led to temporary outperformance, but systematically capturing such gains has proven challenging. Our study investigates the potential to exploit technology sector dominance using momentum-based strategies across Fama–French 12 industry portfolios, analyzing whether long-only, long-short, and rolling-basis approaches can generate persistent alpha, and assessing the limitations of simple timing methods.

Bitcoin ETFs in Conventional Multi-Asset Portfolios

September 2, 2025

Understanding how Bitcoin-related instruments can fit into traditional portfolios is increasingly relevant for investors. Some risk-averse investors do not like to hold cryptocurrencies in their portfolios strategically; however, they may be open to investing in crypto-linked assets on a tactical level. In this context, our goal is to explore how we can provide short-term Bitcoin exposure while contributing to overall portfolio balance and potential downside protection.

The Best Strategies for FX Hedging

August 22, 2025

Foreign exchange (FX) markets are a cornerstone of global finance, offering investors and corporations opportunities to manage currency risk, enhance returns, and optimize portfolio performance. Among the most critical challenges in FX is the design of robust hedging strategies to mitigate exposure to volatile currency movements. How does the financial industry deal with this task? We can draw inspiration from the paper written by Castro, Hamill, Harber, Harvey, and Van Hemert, which explores strategies such as dynamic hedging, trend-following, and momentum-based approaches, the concept of carry, and the interplay of these strategies with fundamental concepts like Purchasing Power Parity (PPP) and valuation metrics.

Can We Profit from Disagreements Between Machine Learning and Trend-Following Models?

June 26, 2025

When using machine learning to forecast global equity returns, it’s tempting to focus on the raw prediction—whether some stock market is expected to go up or down. But our research shows that the real value lies elsewhere. What matters most isn’t the level or direction of the machine learning model’s forecast but how much it differs from a simple, price-based benchmark—such as a naive moving average signal. When that gap is wide, it often reveals hidden mispricings. In other words, it’s not about whether the ML model predicts positive or negative returns but whether its view disagrees sharply with what a basic trend-following model would suggest. Those moments of disagreement offer the most compelling opportunities for tactical country allocation.

Can Margin Debt Help Predict SPY’s Growth & Bear Markets?

March 5, 2025

Navigating the financial markets requires a keen understanding of risk sentiment, and one often-overlooked dataset that provides valuable insights is FINRA’s margin debt statistics. Reported monthly, these figures track the total debit balances in customers’ securities margin accounts—a key proxy for speculative activity in the market. Since margin accounts are heavily used for leveraged trades, shifts in margin debt levels can signal changes in overall risk appetite. Our research explores how this dataset can be leveraged as a market timing tool for US stock indexes, enhancing traditional trend-following strategies that rely solely on price action. Given the current uncertainty surrounding Trump’s presidency, margin debt data could serve as a warning system, helping investors distinguish between market corrections and deeper bear markets.

How To Profitably Trade Bitcoin’s Overnight Sessions?

November 12, 2024

As interest in cryptocurrencies continues to surge, driven by each new price rally, crypto assets have solidified their position as one of the main asset classes in global markets. Unlike traditional assets, which primarily trade during standard working hours, cryptocurrencies trade 24/7, presenting a unique landscape of liquidity and volatility. This continuous trading environment has prompted us to investigate how Bitcoin, the flagship cryptocurrency, behaves across intraday and overnight periods. With Bitcoin’s growing availability to both retail and institutional investors through ETFs and other investment vehicles, we hypothesized that trading activity in these distinct timeframes could reveal patterns similar to those seen in traditional markets, where returns are often impacted by liquidity shifts during off-peak hours.