Backtest: Buy FANG at the close when its 20-day total return is in the bottom quintile...
The logic has a certain pull: a high-beta Permian E&P that refuses to rally alongside a strong crude tape is being sold by someone who has to sell, and when that pressure lifts the stock should snap back to its oil beta. The question is whether that snapback is actually worth trading.
Across the sample the setup triggered six times. It won two-thirds of them, returned +3.32% on $100,000, and still finished 73 points behind simply holding SPY. Rare signals, a respectable hit rate, and a thin payoff — a combination that says more about the edge than the win rate does.
Every entry, exit, and trade-level P&L is broken out below.
Buy FANG at the close when its 20-day total return is in the bottom quintile of its prior 252-session distribution while Brent crude's 20-day return is in the top quintile of its prior 252-session distribution; exit when FANG closes above its 20-day simple moving average or after 10 trading days, whichever comes first. A high-beta Permian E&P failing to participate in a strong crude tape is being cleared out by positioning, and once the forced selling clears it tends to rejoin the oil beta.
How this was measured
This is a simulated backtest generated from the plain-English strategy below, executed bar-by-bar on historical market data using the price + news data mode with $100,000 starting capital. Strategy: Buy FANG at the close when its 20-day total return is in the bottom quintile of its prior 252-session distribution while Brent crude's 20-day return is in the top quintile of its prior 252-session distribution; exit when FANG closes above its 20-day simple moving average or after 10 trading days, whichever comes first. A high-beta Permian E&P failing to participate in a strong crude tape is being cleared out by positioning, and once the forced selling clears it tends to rejoin the oil beta.
The key numbers
The charts
The takeaway
The strategy returned +3.32% on $100,000 starting capital across 6 closed trades with a 67% win rate. Over the same window SPY buy-and-hold returned +76.34%, so the strategy finished trailing the benchmark by 73.02 points. Best single trade +2.36%, worst -4.15%.
The fine print
- Simulated results on historical data — fills, slippage and costs are idealized.
- Past performance does not predict future results.
- Only 6 closed trades in the window — a small sample.