Equity Cross-Sectional Momentum
Stocks that move up tend to keep moving up at least a little while longer.
The problem
There is no shortage of research on momentum in equities. Someone has even verified the effect in a backtest that runs back to the Victorian era, using London stock prices from 1866 to 1907 (Chabot, Ghysels and Jagannathan, 2009). It is about as prominent an effect as exists in finance, and it has been tested and implemented in more ways than anyone can count.
This implementation is strongly motivated by Andreas Clenow’s Stocks on the Move. It is a cross-sectional momentum strategy that uses a regression of log returns as the momentum score, and sizes positions with risk parity based on inverse volatility. A regime gate addresses momentum crashes, and a handful of other rules — like ignoring and closing out stocks with a daily gap of 15% or more in the last 90 days — round it out. I highly recommend the book.
The idea
Pretty much what is described above. I walk through the strategy in this video and have published the code on GitHub, so feel free to check it out. One thing I have to say: do not use it until you understand the risks involved.