Time-Series Momentum Strategy Evaluator
Evaluate the performance of a Time-Series Momentum strategy against a buy & hold approach.
What is Time-Series Momentum (TSM)?
Time-Series Momentum, also known as Trend Following or Absolute Momentum, is a trading strategy that bases its decisions on an asset's past performance relative to its own history or a risk-free rate. Unlike cross-sectional momentum (which compares multiple assets), TSM focuses on a single asset's price trend over time.
The core principle is simple: if an asset has performed positively over a specified "lookback" period, the strategy goes long (buys) the asset. If it has performed negatively, the strategy typically exits the position and moves to cash (or a risk-free asset) or even goes short (sells borrowed assets, not simulated here for simplicity). The position is then held for a specified "holding" period before re-evaluating the trend.
Key Concepts:
- Lookback Period: The historical timeframe used to calculate the asset's momentum (e.g., past 1 month, 6 months, 12 months).
- Holding Period: How long the position is maintained after a momentum signal is generated.
- Momentum Signal: Typically a positive return over the lookback period, often compared against a threshold (e.g., a positive return implies "up-trend").
- Risk Management: A key benefit of TSM is its inherent risk management. By moving to cash during downtrends, it aims to avoid large drawdowns, unlike a perpetual buy-and-hold strategy.
This evaluator allows you to simulate a TSM strategy on a hypothetical asset and compare its performance against a simple buy-and-hold approach, considering transaction costs and a risk-free rate.
Configure Your Strategy
Set up the market conditions for the asset and define your Time-Series Momentum strategy parameters.
Market Parameters:
Number of months for the simulation (e.g., 120 = 10 years).
e.g., 0.7 for 0.7% growth per month.
Standard deviation of monthly returns.
Return when in cash (e.g., from a savings account).
Time-Series Momentum Parameters:
How many past months to calculate momentum from.
How many months to hold the position after a signal.
Go long if lookback return > this threshold (e.g., 0 for positive return).
Cost for buying or selling (e.g., 0.1 for 0.1%).
Simulation Progress
Set up your strategy on the previous tab to begin.
0% Complete
Live Simulation Data (Last 5 Months):
| Month | Market Price ($) | TSM Port. Value ($) | TSM Action | Lookback Return (%) |
|---|---|---|---|---|
| No data yet. Run evaluation. | ||||
Evaluation Results & Analysis
Initial Investment:
$0.00
Final Buy & Hold Value:
$0.00
Final TSM Portfolio Value:
$0.00
Total Trades Executed (TSM):
0
Total Transaction Costs (TSM):
$0.00
TSM Max Drawdown (%):
0.00%
Performance Comparison:
Run the evaluation to see performance comparison.
Key Insights from Evaluation:
Insights will appear here after evaluation completion.