Thesis
News-sentiment operates on a straightforward premise: enter long positions in large-cap equities when aggregated news sentiment turns positive, exit when it turns negative. The strategy watches a 24-name universe spanning mega-cap tech (AAPL, MSFT, GOOGL, NVDA), financials (JPM, BAC, V, MA), healthcare (JNJ, UNH, PFE, ABBV), consumer staples and discretionary, and energy — a deliberately diversified pool designed to maximise the odds of catching a sentiment-driven move somewhere in the book on any given day.
Recent Activity
Live paper-trading data tells a quiet story. The four most recent executed trades — AAPL (May 31), MSFT (June 3), BAC (June 12), and UNH (June 18) — are all buys. No exits have been logged. Since June 23, the strategy has run daily and executed zero trades across six consecutive sessions, holding a cash balance of $2,810.08 against a total portfolio value that has drifted between roughly $9,606 and $9,748 purely on mark-to-market movement in existing positions.
The dormancy is notable but not alarming on its own — the strategy is intentionally selective, and its sentiment signal evidently found no clean conviction opportunity through the last full week of June.
Validation & Backtest
The 451-day backtest produced a total return of 0.19%, a Sharpe of 0.74, and a maximum drawdown of just 5% — on only two trades and $2 in total fees. Those numbers look tidy in isolation, but the walk-forward picture is harder to dismiss.
Across four out-of-sample folds covering August 2024 through May 2026, the strategy was active in exactly one fold (fold 4: December 2025–May 2026), where it posted a 0.19% return and a 1.5 Sharpe on two trades. The three preceding folds — collectively spanning 17 months — recorded zero trades, zero return, and zero drawdown. The validation framework accordingly flagged the strategy as not passed: only 1 of 4 folds positive, a Deflated Sharpe Ratio of 0.551 (below typical acceptance thresholds), and a Probabilistic Sharpe of 0.923 across six trials.
The PSR reading is encouraging — it suggests the observed Sharpe is unlikely to be pure noise — but the DSR discount for multiple testing and short live history pulls confidence back down.
Strengths
- Controlled drawdown. A 5% maximum drawdown across the tested period is genuinely low and suggests the exit logic provides meaningful downside protection when it fires.
- High out-of-sample Sharpe when active. A 1.5 Sharpe in fold 4 is a meaningful data point — the signal quality appears real within the periods it triggers.
- Diverse universe. Covering 24 names across six sectors reduces dependence on a single catalyst type.
Risks & Outlook
The central risk is signal sparsity. A strategy that traded twice in 15 months of live-equivalent history has an extremely thin execution record. It is difficult to distinguish a genuinely selective, high-conviction signal from a signal that simply fails to fire. Until the strategy accumulates more closed trades — both entries and exits — the win rate will remain unmeasurable and the return figures statistically fragile.
The validation failure should be taken seriously. Three silent folds may reflect a structural mismatch between sentiment data availability and the strategy's entry criteria, or they may indicate that the 2025 macro environment was unusually news-quiet relative to what the model was tuned on. Investigating which explains the inactivity would be the most productive next step before widening the strategy's capital allocation.