Investors often seek strategies that can efficiently navigate the market’s ebb and flow. One such approach is the monthly seasonality trading strategy, which we have backtested using Old Dominion Freight Line (ODFL) stocks. Our findings shed light on the potential of this strategy over two decades, with no short positions taken.
Company Overview
Old Dominion Freight Line (ODFL) is a leading name in the transportation and logistics industry, offering a wide range of services, including less-than-truckload shipping, ground and air expedited transportation, and supply chain consulting. Known for its premium service and reliability, ODFL has established itself as a key player in ensuring the smooth flow of goods across North America.
Strategy Overview
Our trading strategy focuses on going long on ODFL stocks at the close of December, February, June, September, and October, capitalizing on historically favorable months. Spanning from January 2003 until December 2022, this strategy was active 35% of the time, reducing market exposure compared to a continuous investment.
Key Performance Indicators
The strategy yielded an impressive final equity of $383,553 from an initial $10,000 investment, with a peak equity of $403,171. It achieved a 3735% return, with an annualized return of 20%, contrasted against a staggering 11341% buy-and-hold return with an annualized return of 26.82% for the same period.
| Strategy | Buy and Hold | |
|---|---|---|
| Start Date | 2003-01-02 | 2003-01-02 |
| End Date | 2022-12-30 | 2022-12-30 |
| Duration | 7302 days | 7302 days |
| Exposure Time [%] | 35.13 | 99.96 |
| Equity Final [$] | 383553.12 | 1152685.68 |
| Equity Peak [$] | 403171.33 | 1457839.57 |
| Return [%] | 3735.53 | 11426.86 |
| Return (Ann.) [%] | 20.02 | 26.82 |
| Volatility (Ann.) [%] | 28.45 | 49.22 |
| Sharpe Ratio | 0.7 | 0.54 |
| Sortino Ratio | 1.37 | 1.08 |
| Calmar Ratio | 0.47 | 0.53 |
| Max. Drawdown [%] | -42.56 | -50.86 |
| Avg. Drawdown [%] | -4.07 | -4.6 |
| Max. Drawdown Duration | 1577 days | 1486 days |
| Avg. Drawdown Duration | 56 days | 33 days |
| # Trades | 60 | 1 |
| Win Rate [%] | 70.0 | 100.0 |
| Best Trade [%] | 49.6 | 11426.91 |
| Worst Trade [%] | -16.02 | 11426.91 |
| Avg. Trade [%] | 6.27 | 11426.91 |
| Max. Trade Duration | 63 days | 7300 days |
| Avg. Trade Duration | 41 days | 7300 days |
| Profit Factor | 4.47 | nan |
| Expectancy [%] | 6.94 | 11426.91 |
| SQN | 3.33 | nan |
Risk Management
Risk analysis reveals an annualized volatility of 28.45%, a Sharpe Ratio of 0.70, and a maximum drawdown of -42.55%, with an average drawdown duration of 56 days. These figures suggest a moderate level of risk relative to the returns achieved.
Trade Analysis
Over 60 trades, the strategy boasted a 70% win rate. The best trade surged at 49.60%, while the worst saw a -16.01% dip. The average trade yielded a 6.27% return, indicating a consistent performance with a profit factor of 4.47 and an expectancy of 6.94% per trade.
Conclusion
The monthly seasonality trading strategy has demonstrated substantial growth potential with Old Dominion Freight Line stocks, albeit with lower returns compared to a buy-and-hold approach. However, the reduced market exposure and lower drawdowns may appeal to investors seeking a more balanced risk-reward profile.
“Make the invisible visible. My goal is to shine a light on the subtle seasonal signals in the stock market, providing investors with the insight needed to make informed decisions. By breaking down the complexities of seasonality, I strive to empower our audience with knowledge and foresight, turning data into action.”