Backtest: New Constructs Post Earnings Long Model Diversified with VIX

Performance 12/30/16 - 1/12/21
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Investment Approach
New Constructs Long Model Diversified:
New Constructs is an expert in identifying transitory earnings distortions. These are one-off line items in a company’s earnings report that present a temporary state in time but could distort the true business outlook.
The long only model exploits conditions where the street gets a company's earnings outlook wrong. While temporary in nature, these one-off line items in a company’s earnings report could ultimately distort the true business outlook.This model seeks to specifically exploit earnings distortions by screening daily for all new 10Ks and 10Qs in the Russell 1000. It further identifies optimal conditions for entry (based on how wide the displacement is between the street and the model's outlook).The portfolio’s goal is to outperform the benchmark EQAL (Russell 1000 Equal Weight ETF) in risk adjusted return as measure by its Sharpe ratio

The model carries forward the following backtest execution guidelines:

  • Every earnings date we project core earnings outlook against analysts outlook for the next quarterly earnings.
  • Model is trained on a perpetual basis every quarter with an expanding window.
  • To enable a fair comparison between different business sizes the earnings distortion are normalized by market cap.
  • The model filters for relevant constituents daily.
  • The constituents which hold negative distortions (which means, their earnings are negatively impacted, albeit temporarily) are identified.
  • All held securities are equally weighted upon entry.
  • Mini/Max allocations guideline are: 0.2%/1.7%
  • Trailing Stop Loss of 3.5% is also enacted.
  • Please note: This backtest simulates stop losses pessimistically and we expect real-time performance to be less punitive on stop loss exits.
  • Positions are held conditionally as long as the buy signal remains active or until an exit criteria(Stop loss) is activated.
  • The backtest considers slippage per transaction and commissions. See report below for additional details.
Performance Versus Benchmark 12/30/16 to 1/12/21
Strategy Overall Bench Overall Strategy TTM Bench TTM
Abs. Return 160.4% 59.7% 76.0% 19.3%
Rel. Return 100.7% N/A 56.8% N/A
Beta 0.65 N/A 0.58 N/A
Ann. Volatility 17.6% 21.6% 28.1% 37.6%
Sharpe 1.44 0.65 2.15 0.66
Drawdown -17.7% -40.4% -15.4% -40.4%
IR 0.86 N/A 1.52 N/A
Tracking Error 13.1% N/A 23.6% N/A
Historical Summary
1 Yr 2 Yr 3 Yr 5 Yr 10 Yr
Ann. Return 76.0% 49.8% 29.6% N/A N/A
Ann. Volatility 28.1% 21.6% 19.8% N/A N/A
Performance Attribution
Risk/Return versus benchmark
Monthly Return Comparison Trailing 12 Months
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Total
Strategy 0.2% 4.1% 15.9% 7.6% 5.9% 4.8% 3.1% 0.4% -0.0% 11.9% 4.7% 3.8% 76.0%
Benchmark -9.1% -19.1% 18.2% 6.1% 1.5% 4.8% 4.1% -3.9% 0.2% 15.5% 4.7% 4.2% 19.3%
Rel. Return 9.3% 23.2% -2.3% 1.5% 4.4% -0.0% -1.0% 4.3% -0.2% -3.7% 0.1% -0.4% 56.8%
  
Perspective on Performance

Backtest: New Constructs Post Earnings Long Model Diversified with VIX

Strategy Performance Analysis by Neuravest
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Performance Report
Performance Chart
Correlation
Beta
Exposure
  
Value At Risk
Rolling Stats
Return Attributions
Participation and Contribution
Top Participation Long
TEAM3.12
MPC3.10
ANET3.09
VEEV3.05
NOW3.04
Top Participation Long/Short
TEAM3.12
MPC3.10
ANET3.09
VEEV3.05
NOW3.04
Top Long Winners
TSLA6.8%
W2.8%
EW1.8%
CVNA1.7%
SQ1.3%
Top Long/Short Winners
TSLA6.8%
W2.8%
EW1.8%
CVNA1.7%
SQ1.3%
Top Long Losers
MIK-0.2%
UAL-0.2%
RRC-0.1%
PTEN-0.1%
SITC-0.1%
Top Long/Short Losers
MIK-0.2%
UAL-0.2%
RRC-0.1%
PTEN-0.1%
SITC-0.1%
  
Simulation Settings
Strategy Settings
Module:N/A
Date of report: 2/3/21 12:09 PM
Date Range: 12/30/16-1/12/21
Generated by: NewConstructs Research
Benchmark: EQAL
Transaction Cost Modeling:
Leverage
Short Borrowing0.0%
Slippage ModeSpecify a bps value
Slippage0 bps
Rebalancing:
FrequencyEvery 1 Days
Preferred Day N/A
EqualAllocator Settings:
Description Equally Allocates across input universe.
Input Universe Weight->Univ((1e-08
Direction Long
IgnoreDriftAlloc Settings:
Description Stops Drift
  
Performance Metrics
Transaction Cost:
Commissions ($0.004 per share, $2.95 min per trade)$83,823
Slippage$29,493
Borrowing Costs$0
Total Transaction Costs$113,315

Transaction Analysis:
Number of Transactions 27,979
Average Trade Hold Days (Weighted) 20.00 (20.60)
% Successful Transactions (Weighted) 51.1% (67.6%)
% Hit Stop Loss 2.2%
% Hit Stop Gain 0.0%
Profit Ratio 2.01
Monthly Performance Metrics:
Days of Outperformance 53.5%
Months of Outperformance57.1%
Most Consecutive Months of Outperformance7
Most Consecutive Months of Underperformance2
Benchmark Relative Metrics:
Beta0.65
Information Ratio0.86
Annualized Tracking Error13.1%
Performance Metrics:
Portfolio Return Sharpe Sortino Alpha Ann. Volatilty Max DrawDown
Fund160.4%1.441.83 1.22 17.6% -17.7%
Benchmark59.7%0.650.72 0.00 21.6% -40.4%
Portfolio Initial Adjusted Final Adjusted Return Compound Annual Return
Fund$1,000K$2,604K$1,604K 26.8%
Benchmark$1,000K$1,597K$596,983 12.3%
  
Performance Metrics By Year
2017 2018 2019 2020 2021
ReturnStrategy 16.0% -4.9% 31.8% 72.6% 3.8%
Benchmark 17.4% -9.2% 24.5% 15.5% 4.2%
Winning DaysStrategy 57.0% 53.8% 58.0% 57.9% 85.7%
Benchmark 55.5% 53.2% 54.8% 55.2% 71.4%
SharpeStrategy 1.96 -0.26 2.25 2.08 6.72
Benchmark 2.05 -0.55 1.75 0.57 7.00
SortinoStrategy 2.78 -0.28 3.03 2.92 0.00
Benchmark 3.29 -0.67 2.35 0.67 7.96
Max DDStrategy -5.3% -17.7% -6.4% -15.4% -1.7%
Benchmark -3.9% -21.0% -7.8% -40.4% -1.5%
AlphaStrategy 0.01 0.02 0.10 0.64 0.00
Benchmark 0.00 0.00 0.00 0.00 0.00
Ann. VolatiltyStrategy 7.7% 15.1% 12.6% 27.9% 17.7%
Benchmark 8.0% 15.5% 13.0% 37.3% 18.7%
Tracking ErrorStrategy 0.2% 0.6% 0.3% 1.5% 0.4%
Benchmark 0.0% 0.0% 0.0% 0.0% 0.0%
  
Monthly Return to Benchmark By Year
JanFebMarAprMayJunJulAugSepOctNovDecTotal
2017 Strategy 2.1% 2.9% -0.1% 1.0% -1.4% 2.0% 1.3% -2.2% 3.2% 1.9% 3.3% 1.0% 16.0%
Benchmark 2.4% 2.7% -0.1% 0.4% -0.0% 0.9% 1.5% -0.6% 3.0% 1.3% 3.5% 1.3% 17.4%
Relative Return -0.3% 0.2% 0.1% 0.6% -1.4% 1.1% -0.2% -1.6% 0.2% 0.7% -0.2% -0.3% -1.4%
 
2018 Strategy 4.4% -0.6% -0.8% 0.2% 2.4% -1.0% 2.8% 4.1% -0.6% -9.0% 2.8% -8.6% -4.9%
Benchmark 3.0% -4.8% -0.0% 0.9% 2.3% 1.2% 2.2% 2.3% 0.3% -8.0% 1.8% -9.7% -9.2%
Relative Return 1.4% 4.1% -0.7% -0.7% 0.1% -2.3% 0.6% 1.8% -0.9% -1.0% 0.9% 1.2% 4.3%
 
2019 Strategy 11.3% 4.4% 1.0% 3.3% -5.8% 6.3% 1.7% 1.5% 0.9% -0.8% 4.2% 0.8% 31.8%
Benchmark 10.8% 3.3% 1.0% 2.9% -7.6% 7.1% 0.6% -4.1% 2.3% 0.4% 3.2% 3.4% 24.5%
Relative Return 0.4% 1.1% 0.0% 0.4% 1.8% -0.8% 1.1% 5.6% -1.4% -1.2% 1.0% -2.5% 7.2%
 
2020 Strategy -1.3% 0.2% 4.1% 15.9% 7.6% 5.9% 4.8% 3.1% 0.4% -0.0% 11.9% 4.7% 72.6%
Benchmark -2.9% -9.1% -19.1% 18.2% 6.1% 1.5% 4.8% 4.1% -3.9% 0.2% 15.5% 4.7% 15.5%
Relative Return 1.5% 9.3% 23.2% -2.3% 1.5% 4.4% -0.0% -1.0% 4.3% -0.2% -3.7% 0.1% 57.1%
 
2021 Strategy 3.8% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 3.8%
Benchmark 4.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 4.2%
Relative Return -0.4% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A -0.4%
 
Monthly Turnover For Strategy By Year
JanFebMarAprMayJunJulAugSepOctNovDecTotal
2017 93.1% 68.5% 37.5% 25.0% 134.3% 30.7% 32.6% 245.6% 36.1% 34.7% 52.6% 28.7% 819.4%
2018 82.0% 200.2% 148.1% 44.2% 138.0% 217.7% 33.9% 145.9% 22.0% 225.8% 52.0% 119.2% 1,429.1%
2019 30.0% 73.3% 34.0% 32.6% 226.6% 27.0% 42.3% 219.3% 17.8% 131.5% 45.4% 122.3% 1,002.0%
2020 124.1% 187.6% 250.0% 46.8% 58.9% 125.4% 22.7% 27.1% 116.9% 119.2% 23.2% 22.8% 1,124.7%
2021 7.3% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 7.3%
  

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Investment advisory services provided by Neuravest Research Inc., a registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Nothing presented herein has been approved or verified by the United States Securities and Exchange Commission or by any self regulatory organization (SRO), or state securities authority.

Information presented herein is hypothetical and solely for informational purposes only, and should not be construed as an offer to buy or a solicitation of an offer to sell any security or other investment product. Though we have endeavored to present the information contained herein from sources believed to be reliable, we cannot guarantee the accuracy of such information and make no warranties or representations as such.

All investments involve risks that an investor should fully understand and be willing to bear. Past performance is no guarantee of future returns, and investing can result in partial or complete loss of invested capital. Such risks can be magnified to the extent leverage is deployed in the pursuit of potentially higher returns.

To the extent investment returns are presented, such investment returns are either hypothetically backtested or reflect a perpetual paper trading simulation and are labeled as such. Returns are presented as net returns of transaction costs, slippage and short borrowing costs (when applicable). Investment returns are also net of Neuravest standard annualized management fees of 40 basis points (on Assets Under Management) and 10% performance fee on excess return above an 8% hurdle. Investment returns presented reflect the reinvestment of dividends and other earnings, however they do not account for taxes that an investor may owe as a result of any investment gains. Investors may incur taxes as a result of investing, and may pay different transaction costs to the ones presented to the broker-dealer executing the transactions for their account(s).

Hypothetical backtested returns are simulated, retroactive, and created using the benefit of hindsight to a select period of time, and are thus inherently not as reflective of actual historical returns. Any hypothetical backtested returns are based on the following assumptions and criteria:

  • Actual price was available for execution
  • Capacity and daily float was supportive of volume traded.
  • Transaction cost and slippage are reflective of real-world brokerage fees.

Hypothetical backtested returns do not reflect actual trading and do not reflect the impact that material economic and market factors may have had on Neuravest’s algorithmic decision-making at the time.

To the extent investment performance is compared to one or more indexes, investors should be aware that one cannot invest directly into an index (a simulated basket of securities that do not reflect fees, costs, or taxes that an investor may actually incur).

Neuravest Research and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your personal tax, legal and accounting advisors before engaging in any transaction.

Asset allocation/diversification or hedging does not guarantee a profit or protect against a loss.

Hypothetical backtest results, past performance is not indicative of future returns. Results are net of transactions' cost as well as of subscription fees of 40bps on AUM plus performance fee of 10% on excess return above an 8% hurdle.
Results are effective as of the last day of the backtest.

Performance fees may vary depending upon executed leverage.

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