Dec 11, 2014
Backtest | Relative Strength
I run a portfolio relative strength backtest with 5 ETF but all are assigned an equal weight of 20%. How can I assign different weights to the ranked ETFs? Example: Top 5 Weighted as 30%, 30%, 20%, 10%, 10% respectively."
For this you would use the Advanced Relative Strength Backtest Module (subscriber link).
By layering the strategies using different numbers of selections while at the same time using the same ETF list, you can create weightings based on Rank.
Note that the top ranked security in this portfolio list would receive 10% from portfolio 1, 10% from portfolio 2 and 10% from portfolio 3. The backtest report combines weights and it becomes simply 30% for the top ranked ETF. The backtest will appropriately rotate the 30% weight to the top ranked security and likewise for the other ETFs. Dive into the backtest report to see all the breakdown of sub-periods and the weightings of each ETF and its contribution to return for that period.
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