Investors are always on the lookout for patterns that can help navigate the ebb and flow of the stock market. Seasonality in stock trading is one such pattern that can offer strategic insights. Today, we’re exploring the intriguing world of seasonal stock market strategies through an in-depth analysis of Carrier Global Corporation (CARR), a leading provider in the HVAC, refrigeration, and fire and security industries.
Company Overview
Carrier Global Corporation is a global leader in creating building and cold chain solutions that matter for people and our planet. It offers a range of innovative HVAC, refrigeration, fire, security, and building automation technologies to address sustainability challenges and support well-being and productivity for its customers.
Strategy Overview
Our focus is on a monthly seasonality trading strategy spanning from March 2020 to December 2022, with trades based on historical monthly performance. Positions are taken long during March, May, June, July, August, October, and November; and short during February, September, and December. The strategy was engaged in the market for approximately 85% of the time over the analyzed period.
Key Performance Indicators
The strategy culminated in an equity peak of $62,361.88, with an impressive 511.88% return, outperforming the buy-and-hold benchmark return of 256.37%. The annualized return of 91.42% far exceeds the buy-and-hold annualized figure of 55.10%, showcasing the strategy’s effectiveness.
| Strategy | Buy and Hold | |
|---|---|---|
| Start Date | 2020-03-19 | 2020-03-19 |
| End Date | 2022-12-30 | 2022-12-30 |
| Duration | 1016 days | 1016 days |
| Exposure Time [%] | 84.92 | 99.72 |
| Equity Final [$] | 61188.28 | 34022.79 |
| Equity Peak [$] | 62361.88 | 46403.35 |
| Return [%] | 511.88 | 240.23 |
| Return (Ann.) [%] | 91.42 | 55.1 |
| Volatility (Ann.) [%] | 60.62 | 69.74 |
| Sharpe Ratio | 1.51 | 0.79 |
| Sortino Ratio | 4.96 | 2.12 |
| Calmar Ratio | 4.8 | 1.35 |
| Max. Drawdown [%] | -19.04 | -40.82 |
| Avg. Drawdown [%] | -3.57 | -4.82 |
| Max. Drawdown Duration | 101 days | 490 days |
| Avg. Drawdown Duration | 14 days | 22 days |
| # Trades | 16 | 1 |
| Win Rate [%] | 87.5 | 100.0 |
| Best Trade [%] | 69.18 | 240.28 |
| Worst Trade [%] | -2.31 | 240.28 |
| Avg. Trade [%] | 11.99 | 240.28 |
| Max. Trade Duration | 124 days | 1014 days |
| Avg. Trade Duration | 54 days | 1014 days |
| Profit Factor | 75.55 | nan |
| Expectancy [%] | 13.14 | 240.28 |
| SQN | 3.88 | nan |
Risk Management
Annualized volatility was reported at 60.62%, with a Sharpe ratio of 1.51, indicating a favorable risk-adjusted return. Maximum drawdown was limited to 19.04%, with an average drawdown of 3.57% and a maximum duration of 101 days. This demonstrates a robust risk management framework in place.
Trade Analysis
Over the course of 16 trades, the strategy boasted an 87.5% win rate. The best trade saw a staggering 69.18% return, while the worst dipped by only 2.31%. The average trade yielded an 11.99% return, with an average duration of 54 days. A high profit factor of 75.55 and an expectancy of 13.14% per trade underline the strategy’s efficacy.
Conclusion
The backtested results suggest that the seasonal trading strategy applied to CARR significantly outperforms a simple buy-and-hold approach. With a disciplined risk management approach and remarkable key performance indicators, this strategy presents a compelling case for investors seeking to capitalize 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.”