How it Works

These are ETFs listed on mayor European Stock Exchanges. When the same ETF is listed on several Exchanges we only display one of them.
These groups of ETFs are scored from 0 to 10 according to their FUNDAMENTALS.
Every time that the ETF fulfill one out of ten thresholds scores 1 point.
News, macro-economical data or technical analysis are NOT been taken into consideration.
These strategies are trying to follow the trend when markets are bullish and cut losses when crises comes.
The idea is to use a strong negatively correlated instrument as Buy and Sell signals for some ETFs. You can check correlations here.
The selected instrument is no other than VIX. After, of course, inverse ETFs, VIX is the most negatively correlated Index with S&P 500, STOXX 50, MSCI All World and other broad equities Indexes.

Strategies:

Strategy 1:
When VIX is above the threshold -> Close Long position (and keep Cash parked).
When VIX is bellow the threshold -> Open Long position.
On this webpage, this strategy is called VIX_Cash

Strategy 2:
When VIX is above the threshold -> Close Long position and then Short.
When VIX is bellow the threshold -> Close Short position and then Open Long position.
On this webpage, this strategy is called VIX_Short

Warning: Shorting is more dangerous and costly than going Long. Be 100% sure that you understand how shorting works and the extra costs and risks associated.

Important: Regardless that backtesting shows VIX_Short as a strategy with better returns than VIX_Cash (without shorting), VIX_Short should not be considered as the best strategy and not even realistic because you might have to go short for months (i.e. during Covid crisis). VIX_Short should be considered a theoretical strategy that (maybe) with further development could become realistic.

Benchmark:
Just Buy and hold an ETF.

Threshold Selection:
I back tested the returns of the strategies combining different VIX prices, EMA(1 to n), SMA(1 to n), etc... and selected the thresholds with the higher historical returns.
For S&P 500 Index, for instance, the optimal VIX Threshold founded was 20, which is actually widely used as a turning point by professionals.

Performance Chart:
Assumed Fee per Trade: €32
Shorting Fee (Only VIX_Short Strtegy): Not Included

You can find more information about it on our subreddit.
Correlation is a coefficient that measures how much in unison the prices of securities (such as ETFs) move in relation to each other.
This coefficient is important because allows you to know if your portfolio is diversified enough.
Many times, investors think that because they hold ETFs tracking different Markets, Assets or Strategies are diversified enough, but in reality, even not connected ETFs may move in harmony diminishing the benefits of diversification.

The correlation coefficient's values range between -1.0 (colder colors) and 1.0 (warmer colors):
* A perfect positive correlation (1) means that as one security moves, either up or down, the other security moves in lockstep, in the same direction.
* A perfect negative correlation (-1) means that two assets move in opposite directions.
* Zero correlation implies no linear relationship at all.

Keep in mind that correlations among securities changes over time and economic cycles. For instance, they trend to 1 during panics, that’s why also added correlations during 2019 and 2020 alone to compare.
The "Correlation Total" was measured during the amount of days noted in "Observations" row (the higher, the better).
Only European based ETFs incepted before 2018 are on this list.
You can learn more about Correlations and Portfolio Theories from our Recommended Books, specially Smart Portfolios, Portfolio Selection and Modern Portfolio Theory and Investment Analysis.