Linear Regression Channel
Fits a rolling linear regression to recent prices and trades breakouts beyond a standard deviation channel. Exits when price mean-reverts to the regression line.
At a glance
What the backtest shows
- Beat buy-and-hold on 2 of 10 markets by annual return over 5 years.
- Had a smaller maximum drawdown than buy-and-hold on 6 of 10 markets.
- Best market by Sharpe ratio: ETH-USD (Sharpe 0.25, CAGR 2.5%).
- Weakest market: DBC (Sharpe -0.64, CAGR -10.5%).
Equity curve
Score and risk profile
Each bar is a percentile against every strategy on the same market and window (100 = best).
How it held up in sell-offs (SPY)
| Period | Strategy | Buy & hold |
|---|---|---|
| Q4 2018 sell-off | +5.3% | -19.2% |
| COVID crash (Feb–Mar 2020) | +33.9% | -33.7% |
| 2022 bear market | +3.9% | -24.5% |
| Market above its 200-day average (annualized) · 81% | -2.4% | +12.5% |
| Market below its 200-day average (annualized) · 19% | -3.6% | +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) | -0.03 |
| Same parameters in the following 6 months, when traded (Sharpe) | -0.07 |
| Default parameters over the same months (Sharpe) | -0.10 |
| Parameter re-selections / changes | 28 / 12 |
| Parameter settings with a positive Sharpe (full history) | 0 of 9 |
| Sharpe across settings: worst / median / best | -0.37 / -0.19 / -0.10 |
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 |
|---|---|---|---|---|---|---|---|
| ETH-USDEthereum | 2.5% | -15.1% | 0.25 | -66.3% | -79.0% | 42.5% | 70 |
| SLViShares Silver Trust | 1.9% | 15.2% | 0.23 | -41.3% | -57.8% | 31.6% | 41 |
| BTC-USDBitcoin | 1.8% | 2.6% | 0.21 | -43.5% | -75.9% | 34.6% | 56 |
| UNGUnited States Natural Gas | -9.5% | -30.7% | 0.05 | -66.1% | -93.3% | 49.2% | 69 |
| GLDSPDR Gold Shares | -1.1% | 16.4% | 0.01 | -23.9% | -28.3% | 14.1% | 11 |
| SPYSPDR S&P 500 | -3.0% | 11.6% | -0.17 | -32.8% | -24.5% | 13.3% | 9 |
| USOUnited States Oil Fund | -9.4% | 20.2% | -0.19 | -64.0% | -36.2% | 28.3% | 16 |
| EURUSD=XEUR/USD | -1.8% | -0.7% | -0.27 | -15.4% | -17.2% | 5.9% | 30 |
| DBAInvesco DB Agriculture | -3.7% | 8.8% | -0.28 | -23.0% | -15.9% | 11.2% | 13 |
| DBCInvesco DB Commodity Index | -10.5% | 10.8% | -0.64 | -60.6% | -27.3% | 15.3% | 6 |
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
Rules
Entry
Go long when price > upper channel Go short when price < lower channel
Exit
Close long when price < regression line Close short when price > regression line
Indicators
Regression line Upper/Lower channel
Inputs
Period = 50 Std_Dev = 2.0
Position sizing
Fixed 100% allocation
Risk controls
Channel width adapts to volatility
Strategy evidence
- BTC-USD · Inspect evidence 2026-11-10
- DBA · Inspect evidence 2026-11-10
- DBC · Inspect evidence 2026-11-10
- ETH-USD · Inspect evidence 2026-11-10
- EURUSD=X · Inspect evidence 2026-11-10
- GLD · Inspect evidence 2026-11-10
- SLV · Inspect evidence 2026-11-10
- SPY · Inspect evidence 2026-11-10
- UNG · Inspect evidence 2026-11-10
- USO · Inspect evidence 2026-11-10
Only available, validated bundles appear below. Missing evidence is not a passing validation result.
Evidence coverage
10 / 10 declared strategy–market pairs validated
Notes
- Needs enough data for stable regression
- Choppy markets can whipsaw
Related strategies
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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.