Thesis and Approach
The news-sentiment strategy is straightforward by design: scan recent headlines across a 24-stock universe of large-cap names — spanning tech, financials, healthcare, consumer staples, energy, and industrials — and go long when aggregate sentiment turns positive, exit when it turns negative. The logic is intuitive and well-grounded in academic literature; the implementation challenge is everything.
Recent Activity
The strategy has been running daily since at least late May, but the activity log tells a story of near-total restraint. Its only two executed trades were a buy of 6 shares of AAPL at $312.06 on May 31 and 4 shares of MSFT at $428.23 on June 3. Every scheduled run from June 4 through June 11 returned zero executions and zero rejections — the engine ran, found nothing it liked, and stood aside.
The portfolio currently sits at roughly $9,737 in total value against $6,415 in cash, implying the two open positions have drifted modestly into the red since entry. That mark-to-market erosion — from a near-$10,000 high on June 4 — is worth watching, though it remains well within normal single-stock noise.
The win rate reports as zero, which is technically accurate: no position has yet completed a full round-trip, so no closed trade has been scored as a win or a loss.
Backtest and Validation
Over the 451-day backtest window, the strategy produced a total return of +0.19% (annualised CAGR roughly 0.10%), a Sharpe ratio of 0.74, and a maximum drawdown of just 0.05%. Those headline numbers look clean — but the cross-validation detail is sobering.
The backtest was split into four sequential folds:
| Fold | Period | Return | Sharpe | Trades |
|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | 0% | 0 | 0 |
| 2 | Jan – Jul 2025 | 0% | 0 | 0 |
| 3 | Jul – Dec 2025 | 0% | 0 | 0 |
| 4 | Dec 2025 – May 2026 | +0.19% | 1.50 | 2 |
Three of four folds were completely flat — the strategy never fired a signal. Every unit of performance is concentrated in fold 4. With only one of four folds positive, the validation gate correctly returned failed.
The Probabilistic Sharpe Ratio (PSR) of 0.923 looks encouraging in isolation, but the Deflated Sharpe Ratio (DSR) of 0.551 — which penalises for the six parameter configurations tested — is the more honest figure. A DSR below 0.65 suggests a meaningful risk that the observed edge is a product of selection rather than genuine alpha.
Strengths
- Minimal drawdown: The strategy has demonstrated excellent capital preservation; a 0.05% max drawdown over 15 months is exceptional, even if partly explained by inactivity.
- Late-fold Sharpe: When the strategy did trade, fold 4's Sharpe of 1.50 and a low fee load ($2 total, zero FX cost) show it can be efficient when triggered.
- Clean universe: The 24-ticker large-cap focus keeps news quality high and liquidity risk low.
Risks and Open Questions
- Signal scarcity: Two trades in 451 days is not a strategy — it is a coincidence. There is insufficient trade history to assess edge with any statistical confidence.
- Recency concentration: All performance derives from a single recent period. Markets in late 2025 through mid-2026 may have had idiosyncratic sentiment dynamics that won't persist.
- Turnover paradox: A reported annualised turnover of 36.5% against only 2 lifetime trades suggests the backtest engine's turnover calculation and the live execution diverge — worth investigating.
- No exit signals observed: Both positions remain open; the strategy's exit logic has not yet been exercised in live conditions.
Outlook
news-sentiment is best understood as a work-in-progress signal rather than a deployable strategy. The priority is increasing signal frequency — either by broadening the sentiment threshold, expanding the universe, or improving news-feed coverage — so the strategy can accumulate enough trades for meaningful out-of-sample evaluation. Until then, its equity curve is too sparse to trust.