Strategy Overview
Mean-reversion is one of the oldest quantitative theses in equity markets: when a stock becomes sufficiently oversold or overbought relative to recent history, it tends to snap back. Headmars implements this via a straightforward RSI trigger — enter long when RSI falls below 30, exit when it climbs above 70. The 24-ticker universe spans blue-chip large-caps across technology, financials, healthcare, consumer staples, and energy — names liquid enough that execution is clean and slippage risk is low.
Recent Activity: A Quiet Desk
The strategy has been running on a daily schedule but has found nothing worth trading for over two weeks. Every scheduled run from June 4 through June 11 returned zero executions. The last fill was a 21-share buy of WMT at $115.75 on May 31. Portfolio value has drifted between $10,040 and $10,105, with cash sitting at $7,569 — roughly 75% of the book is idle.
This is not a malfunction. It reflects the discipline baked into the RSI thresholds: when large-cap equities move in an orderly, trending fashion, readings rarely breach 30 or 70. The strategy simply waits for genuine dislocations.
Backtest Snapshot
Over 451 days, mean-reversion produced a 14.73% total return (final equity $11,473) across 38 trades, with a CAGR of 7.98% and a Sharpe of 0.58. The win rate — 70.6% — is a genuine positive: seven in ten positions closed green. Max drawdown reached 15.64%, and total fees were a lean $38 flat.
Validation: Where the Signal Breaks Down
The strategy failed Headmars' walk-forward validation, and the fold-by-fold breakdown explains why:
| Fold | Period | Return | Sharpe | Trades |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +2.06% | 0.57 | 8 |
| 2 | Jan 2025 – Jul 2025 | +11.10% | 1.32 | 10 |
| 3 | Jul 2025 – Dec 2025 | +2.21% | 0.46 | 6 |
| 4 | Dec 2025 – May 2026 | −2.84% | −0.33 | 10 |
Fold 2 did almost all the heavy lifting — an 11.1% return at a Sharpe of 1.32 that the surrounding folds never approached. The most recent fold, which serves as the out-of-sample (OOS) period, posted −2.84% and a Sharpe of −0.33. The Deflated Sharpe Ratio (DSR) of 0.30, adjusted for six trials, signals that the overall Sharpe of 0.58 is unlikely to represent a durable edge rather than one favorable window.
Strengths and Risks
Strengths: The win rate and the strategy's inherent discipline — buying weakness, trimming strength — are real. The large-cap universe keeps friction low, and the approach is transparent and easy to audit.
Risks: Mean-reversion is regime-dependent. RSI extremes rarely materialize when markets trend smoothly, as the current quiet spell and the negative most-recent fold both illustrate. With 75% of capital in cash and the OOS period in the red, the strategy is on watch. The validation failure is a legitimate signal that more evidence is needed — across different market conditions — before the edge can be considered reliable.