Thesis
News-sentiment operates on a deliberate premise: scan incoming headlines across a 24-stock large-cap universe — spanning tech, financials, healthcare, consumer, energy, and industrials — and take long positions when sentiment turns positive, flattening when it reverses. No multi-factor overlays, no earnings models; narrative momentum translated directly into paper trades.
Recent Activity
The last seven scheduled runs (June 5–12) produced a single execution: a 35-share buy of BAC at $55.93 on June 12. The two prior entries — 4 shares of MSFT at $428.23 on June 3, and 6 shares of AAPL at $312.06 on May 31 — complete the current book. All other daily runs returned zero trades and zero rejections.
Total portfolio value stood at $9,694.08 as of June 12, down from $9,940.84 a week earlier — a roughly 2.5% mark-to-market slide. Cash of $4,437.59 implies approximately 54% of capital is currently deployed across those three open positions, none of which has yet been closed.
Backtest Snapshot
Over 451 backtest days the strategy executed 2 trades, finishing with final equity of $10,018.55 on a $10,000 base — a 0.19% total return, a CAGR of approximately 0.10%, and a max drawdown of just 0.05%. Total fees were $2; FX cost was zero. Turnover came in at 36.5%.
The Sharpe ratio of 0.74 is acceptable in isolation. The complication is the sample size: two trades and no completed round-trip exits leave the statistical foundation thin enough that most of these numbers should be read as directional rather than definitive.
Validation: Not Yet Passing
Cross-validation across four folds is where the picture sharpens — unfavorably. Three of the four periods, spanning August 2024 through December 2025, produced zero trades and zero return. The entire 0.19% total return, and a fold-level Sharpe of 1.5, traces back to fold 4 alone (December 2025 – May 2026).
The Deflated Sharpe Ratio (DSR) of 0.551 sits below the conventional 0.65 acceptance threshold, signaling that the observed Sharpe across six trials does not clear the multiple-testing bar with confidence. The PSR of 0.923 is more encouraging, but cannot compensate for the fold-concentration problem on its own. Validation status: failed.
Strengths
- Drawdown discipline: A 0.05% max drawdown is a genuine positive. Staying in cash when the signal is absent preserved capital through most of the test window.
- Low friction: $2 in total fees and zero FX drag mean the strategy is not leaking edge through costs.
- Proof of concept in fold 4: A Sharpe of 1.5 during the active window shows the mechanism can produce risk-adjusted returns when actionable sentiment is present.
Risks
- Signal sparsity: Two trades over 451 days is more waiting room than trading system. It remains unclear whether the strategy is being appropriately selective or is simply threshold-bound too tightly.
- Single-regime dependence: Three empty folds followed by one productive one reads as a regime-specific result, not a generalizable edge. If fold 4's environment was anomalous, recurrence is an open question.
- No realized exits: Win rate is 0 — not from losing exits, but because no position has been closed. All performance is unrealized.
- Live underperformance: Current portfolio value of $9,694 trails the backtest's final equity of $10,018, suggesting live conditions are diverging from backtest assumptions.
Outlook
News-sentiment is disciplined but may be miscalibrated. The central diagnostic question is why the signal fires across only one of four historical periods. Whether that reflects a sentiment threshold set too conservatively, a data-frequency mismatch, or genuine sparsity of clear signals in a large-cap universe, resolving it is the prerequisite for a clean validation pass.