RP-01 · Volatility

Volatility Target

Target volatility overlay with a leverage cap.

Risk ParityVolatility

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At a glance

Best onSPY 3Y Vol Stability Top3

Signal frequencyDaily

Typical holding periodContinuous

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 9 of 10 markets.
Best market by Sharpe ratio: GLD (Sharpe 1.10, CAGR 10.7%).
Weakest market: EURUSD=X (Sharpe -0.22, CAGR -2.3%).

Equity curve

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

Score and risk profile

Arena Score: 74.1SPY, 5 years

Return quality · 30%82

Drawdown control · 25%59

Consistency · 20%70

Robustness · 15%76

Significance · 10%93

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

Time in market100%

Ulcer index6.9%

Longest drawdown607 days

Daily VaR (95%)-1.38%

Probability Sharpe > 093%

Beta vs buy & hold0.70

Alpha (annual)+0.2%

Positive months57%

CAGR after 10 bp costs7.6%

Deflated Sharpe (luck-adjusted)51%

CAGR, 90% bootstrap range-0.4% to 17.1%

Max drawdown, 90% bootstrap range-30.7% to -11.7%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-11.7%	-19.2%
COVID crash (Feb–Mar 2020)	-8.7%	-33.7%
2022 bear market	-16.0%	-24.5%
Market above its 200-day average (annualized) · 81%	+10.4%	+12.5%
Market below its 200-day average (annualized) · 19%	+11.2%	+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)	0.97
Same parameters in the following 6 months, when traded (Sharpe)	0.91
Default parameters over the same months (Sharpe)	0.90
Parameter re-selections / changes	28 / 12
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.88 / 0.90 / 0.92

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	10.7%	16.4%	1.10	-14.8%	-28.3%	9.8%	78
DBAInvesco DB Agriculture	9.4%	8.8%	0.90	-10.0%	-15.9%	10.8%	87
SLViShares Silver Trust	6.6%	15.2%	0.72	-13.6%	-57.8%	9.9%	86
SPYSPDR S&P 500	8.4%	11.6%	0.66	-16.6%	-24.5%	13.2%	74
USOUnited States Oil Fund	5.8%	20.2%	0.59	-10.8%	-36.2%	10.2%	74
DBCInvesco DB Commodity Index	4.7%	10.8%	0.45	-19.8%	-27.3%	11.5%	62
BTC-USDBitcoin	6.3%	2.6%	0.40	-21.6%	-75.9%	12.2%	80
ETH-USDEthereum	2.7%	-15.1%	0.20	-22.3%	-79.0%	12.4%	75
UNGUnited States Natural Gas	-1.4%	-30.7%	-0.12	-21.1%	-93.3%	8.6%	64
EURUSD=XEUR/USD	-2.3%	-0.7%	-0.22	-17.8%	-17.2%	8.5%	26

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	+4.9%	4.9%	0.51	0.66	-9.1%	52%	251
3 years	+53.8%	15.4%	1.17	1.45	-14.3%	57%	711
5 years	+49.5%	8.4%	0.66	0.88	-16.6%	53%	1204
Full history	+442.4%	10.6%	0.92	1.17	-16.6%	55%	3795

Rules

Indicators

Rolling volatility

Inputs

TargetVol = 10%

Position

Size = TargetVol / RealizedVol

Risk

Cap leverage at 1.5x

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

Applies a volatility targeting overlay to each asset.

Related strategies

COMBO-01 · SPY 5Y Sharpe 0.03Bollinger-Keltner Squeeze CS-02 · CS-UNIV 5Y Sharpe 0.97Low Volatility Rotation MR-02 · SPY 5Y Sharpe 0.39Bollinger Band Reversion PORT-01 · RISK-PARITY 5Y Sharpe 1.04Risk Parity PORT-05 · HRP 5Y Sharpe 0.95Hierarchical Risk Parity REG-14 · SPY 5Y Sharpe 0.46Volatility Regime Switch

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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.