REG-14 · Volatility

Volatility Regime Switch

Identifies volatility regimes using historical percentiles. Low volatility regime = full position, high volatility regime = reduced or zero position. Protects capital during turbulent periods.

RegimeVolatilityAdaptive

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At a glance

Best onMarkets with volatility clustering

Signal frequencyDaily

Typical holding periodDays to weeks

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 4 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 10 of 10 markets.
Best market by Sharpe ratio: GLD (Sharpe 1.02, CAGR 11.1%).
Weakest market: UNG (Sharpe -0.19, CAGR -11.4%).

Equity curve

Volatility Regime Switch Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 42.6SPY, 5 years

Return quality · 30%52

Drawdown control · 25%35

Consistency · 20%44

Robustness · 15%7

Significance · 10%85

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market77%

Ulcer index7.2%

Longest drawdown760 days

Daily VaR (95%)-1.04%

Probability Sharpe > 085%

Beta vs buy & hold0.38

Alpha (annual)-0.1%

Positive months48%

CAGR after 10 bp costs2.9%

Deflated Sharpe (luck-adjusted)34%

CAGR, 90% bootstrap range-3.1% to 12.0%

Max drawdown, 90% bootstrap range-29.3% to -9.9%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-6.8%	-19.2%
COVID crash (Feb–Mar 2020)	-3.5%	-33.7%
2022 bear market	-10.7%	-24.5%
Market above its 200-day average (annualized) · 81%	+6.2%	+12.5%
Market below its 200-day average (annualized) · 19%	+3.3%	+19.8%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (SPY)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.92
Same parameters in the following 6 months, when traded (Sharpe)	0.75
Default parameters over the same months (Sharpe)	0.75
Parameter re-selections / changes	28 / 14
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.66 / 0.69 / 0.76

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
GLDSPDR Gold Shares	11.1%	16.4%	1.02	-22.8%	-28.3%	11.2%	65
DBAInvesco DB Agriculture	7.8%	8.8%	0.92	-10.5%	-15.9%	8.7%	87
SPYSPDR S&P 500	4.3%	11.6%	0.46	-17.7%	-24.5%	9.8%	43
SLViShares Silver Trust	5.9%	15.2%	0.42	-27.8%	-57.8%	18.5%	58
BTC-USDBitcoin	10.6%	2.6%	0.39	-54.4%	-75.9%	25.0%	77
DBCInvesco DB Commodity Index	4.1%	10.8%	0.38	-25.2%	-27.3%	11.6%	56
USOUnited States Oil Fund	5.9%	20.2%	0.35	-35.3%	-36.2%	21.2%	59
ETH-USDEthereum	8.9%	-15.1%	0.33	-56.7%	-79.0%	33.6%	81
EURUSD=XEUR/USD	-0.3%	-0.7%	-0.05	-6.7%	-17.2%	4.4%	48
UNGUnited States Natural Gas	-11.4%	-30.7%	-0.19	-70.9%	-93.3%	33.8%	42

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

SPY across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	-7.0%	-7.0%	-0.63	-0.67	-9.0%	42%	52
3 years	+31.2%	9.5%	1.11	1.23	-9.0%	44%	88
5 years	+23.2%	4.3%	0.46	0.52	-17.7%	41%	149
Full history	+153.7%	5.7%	0.66	0.72	-18.1%	41%	449

Rules

Entry

Vol percentile < 50 (low vol regime): full position

Exit

Vol percentile > 80 (high vol regime): exit

Indicators

Realized volatility
Volatility percentile rank

Inputs

Vol_Lookback = 20
Percentile_Window = 252
Low_Pct = 50
High_Pct = 80

Position sizing

Dynamic based on vol regime

Risk controls

Auto de-risk in high vol

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Low volatility often precedes returns
High volatility = increased risk
Regime-based allocation is defensive

Related strategies

VOL-13 · SPY 5Y Sharpe 0.47Volatility Regime Strategy COMBO-01 · SPY 5Y Sharpe 0.03Bollinger-Keltner Squeeze CS-02 · CS-UNIV 5Y Sharpe 0.97Low Volatility Rotation MACRO-02 · SPY 5Y Sharpe 0.40Risk-On/Risk-Off Switch MR-02 · SPY 5Y Sharpe 0.39Bollinger Band Reversion MR-07 · SPY 5Y Sharpe 0.37Hurst-Filtered Mean Reversion

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Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.