Investors are constantly seeking ways to maximize their returns and minimize risks. Seasonality in the stock market presents opportunities for those equipped with the right information and strategies. Today, we delve into a compelling seasonal trading strategy applied to PAYC, revealing insights that could transform your investment approach.
Company Overview
PAYC, known for its cloud-based human capital management software solutions, has been a notable player in providing innovative products. Their comprehensive suite includes payroll processing, talent acquisition, and employee time and labor management, catering to a broad range of businesses seeking to optimize their human resources.
Strategy Overview
Our focus lies on a long and short position monthly seasonality trading strategy initiated between April 2014 and December 2022, with an active exposure time of approximately 60.6%. This strategy involves taking long positions in February, April, June, July, August, and October, and a short position in December.
Key Performance Indicators
The trading strategy yielded a final equity of $341,898.45 from an initial capital of $10,000. This remarkable performance surpassed the buy-and-hold return of 1921.56%, with an annual return of 50.00% versus 40.99% for the latter.
| Strategy | Buy and Hold | |
|---|---|---|
| Start Date | 2014-04-15 | 2014-04-15 |
| End Date | 2022-12-30 | 2022-12-30 |
| Duration | 3181 days | 3181 days |
| Exposure Time [%] | 60.59 | 99.91 |
| Equity Final [$] | 341898.45 | 199395.12 |
| Equity Peak [$] | 351456.95 | 353698.56 |
| Return [%] | 3318.98 | 1893.95 |
| Return (Ann.) [%] | 50.0 | 41.0 |
| Volatility (Ann.) [%] | 50.63 | 69.21 |
| Sharpe Ratio | 0.99 | 0.59 |
| Sortino Ratio | 2.44 | 1.32 |
| Calmar Ratio | 1.58 | 0.77 |
| Max. Drawdown [%] | -31.6 | -53.01 |
| Avg. Drawdown [%] | -4.71 | -6.07 |
| Max. Drawdown Duration | 252 days | 423 days |
| Avg. Drawdown Duration | 24 days | 25 days |
| # Trades | 43 | 1 |
| Win Rate [%] | 83.72 | 100.0 |
| Best Trade [%] | 48.33 | 1896.6 |
| Worst Trade [%] | -19.44 | 1896.6 |
| Avg. Trade [%] | 8.57 | 1896.6 |
| Max. Trade Duration | 95 days | 3179 days |
| Avg. Trade Duration | 44 days | 3179 days |
| Profit Factor | 7.52 | nan |
| Expectancy [%] | 9.41 | 1896.6 |
| SQN | 2.48 | nan |
Risk Management
Despite its impressive returns, the strategy maintained a consistent risk profile with an annual volatility of 50.63% and a Sharpe Ratio of 0.9876. The maximum drawdown observed was -31.60%, with an average drawdown of -4.70%.
Trade Analysis
Over the span of 3181 days, the strategy executed 43 trades with a high win rate of 83.72%. The best trade saw a gain of 48.33%, while the worst encountered a loss of -19.44%. The average trade yielded an 8.57% return, with a profit factor of 7.52.
Conclusion
The backtesting results demonstrate the efficacy of the monthly seasonality trading strategy on PAYC. For retail investors, this strategy not only offers a roadmap to potentially higher returns but also showcases the importance of a systematic approach to capitalizing on market seasonality.
“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.”