XLP Trading Strategies: Consumer Staples Backtest Analysis
XLP is good for trading because it has few “sudden moves”, is very mean revertive, it has potentially many profitable short strategies, and it offers diversification because it moves differently than many of the other stock ETFs, thus providing a hedge.
XLP is great mainly because of the following:
XLP goes its own way and is very good for trading. QQQ and SPY are highly correlated, but XLP correlates less. The reason is most likely twofold: XLP is often a “safe haven”, and due to changes in interest levels it might go opposite directions than for example growth stocks on Nasdaq. Also, short trading strategies work well on XLP.
We trade three different strategies on the short side in XLP. The value of having short strategies is invaluable due to diversification.
The best of the three short strategies has equity curve shown below.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/xlp-trading-strategies/