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APPROVEDEquity Long/Short Risk Committee · Mar 28, 2026

Cross-Sectional Equity Momentum (refresh)

Classic cross-sectional momentum (12-month returns, skip most recent month) applied to S&P 500, with crowding adjustment and sector-neutral overlay.

Strategy Score
88

12-1 momentum revival, robust to factor crowding metric. Approved with 0.4 vol target.

Performance Metrics
WF Sharpe
1.92
OOS Sharpe
1.74
DSR
0.83
Regimes
4/5

How It Works

Long top decile winners, short bottom decile losers based on trailing 12-month returns (excluding last month), rebalanced monthly with sector neutrality.

Mechanics

  1. 1.Rank S&P 500 stocks by 12-month total return (t-12 to t-1)
  2. 2.Skip most recent month (t-1 to t-0) to avoid microstructure reversal
  3. 3.Long top decile (50 stocks), short bottom decile (50 stocks)
  4. 4.Apply sector-neutral constraint (max ±2 stocks per sector)
  5. 5.Adjust position sizes by factor crowding score (reduce size when momentum is crowded)
  6. 6.Rebalance monthly on last trading day

Signals

12-1 month momentum (primary)Factor crowding index (proprietary, based on mutual fund flows)Sector momentum dispersion (overlay for timing)

Performance Results

Sharpe Ratio
Walk-Forward1.92
Out-of-Sample1.74
In-Sample2.08
Returns
Annualized16.8%
Max Drawdown-12.1%
Calmar Ratio1.39
Consistency
Win Rate61%
Profit Factor2.1
Avg Win/Loss1.6% / -1.1%
Capacity Analysis
Max Capacity
$120M
Current Slippage
1.5bps
At Capacity
6bps

Implementation

Instruments

S&P 500 constituents (100 long/short positions)

Execution

MOC orders (market-on-close) for monthly rebal, VWAP for intradaily needs

Rebalancing

Monthly (last trading day of month, 3:55 PM MOC)

Risk Limits

Target 8% ann. vol (0.4% daily), max 12% per stock, sector neutral ±2

Technology

Python research stack, live execution via Interactive Brokers API

Risk Analysis

Factor Crowding

Medium Impact

Crowding score reduces size when momentum is popular

Reversal Events

Medium Impact

Skip recent month reduces short-term reversal impact

Sector Concentration

Low Impact

Sector-neutral constraint enforced

Execution

Low Impact

MOC orders ensure fair pricing, minimal slippage

Backtest Results

Period
Jan 2000 - Mar 2026
Total Trades
15,600
Avg Holding
30 days
Best / Worst Year
+28.3% (2009) / -3.2% (2020)

Stress Period Analysis

2008 Financial Crisis+12.1%

Long/short structure provided downside protection

2020 COVID-3.2%

Brief momentum crash, recovered within 2 months

2022 Bear Market+9.4%

Defensive positioning paid off

Deployment Status

Status

Live since Mar 30, 2026

Allocation

$12000 (12% of AUM)

Brokers

Interactive Brokers (execution), Charles Schwab (backup)

Monitoring

Daily P&L tracking, monthly rebalance verification, quarterly factor exposure review