{"id":38999,"date":"2025-08-13T14:00:00","date_gmt":"2025-08-13T06:00:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=38999"},"modified":"2025-09-05T11:43:44","modified_gmt":"2025-09-05T03:43:44","slug":"turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/","title":{"rendered":"Turning Industry Rotation into Alpha: A Quant Backtest Strategy"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/christian-wiediger-c3ZWXOv1Ndc-unsplash-1024x683.jpg\" alt=\"\u7522\u696d\u8f2a\u52d5\" class=\"wp-image-35138\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-1024x683.jpg 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-300x200.jpg 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-150x100.jpg 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-768x512.jpg 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-1536x1024.jpg 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/christian-wiediger-c3ZWXOv1Ndc-unsplash-2048x1365.jpg 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Photo by <a href=\"https:\/\/unsplash.com\/@christianw?utm_content=creditCopyText&amp;utm_medium=referral&amp;utm_source=unsplash\" target=\"_blank\" rel=\"noopener\">Christian Wiediger<\/a> on <a href=\"https:\/\/unsplash.com\/photos\/a-close-up-of-the-cpu-board-of-a-computer-c3ZWXOv1Ndc?utm_content=creditCopyText&amp;utm_medium=referral&amp;utm_source=unsplash\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d8f6514dab2\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d8f6514dab2\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Introduction\" >Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Visualization_of_Industry_RSI_Values\" >Visualization of Industry RSI Values<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Strategy_Logic_Explanation_Combined_with_Economic_Signal_Lights\" >Strategy Logic Explanation: (Combined with Economic Signal Lights)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Strategy_Performance_Charts_Analysis\" >Strategy Performance Charts &amp; Analysis<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Multi-Strategy_Comparison\" >Multi-Strategy Comparison<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Conclusion_Data-Driven_Rotation_Strategy_Powered_by_TEJ\" >Conclusion: Data-Driven Rotation Strategy, Powered by TEJ<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/turning-sector-rotation-into-strategy-applying-industry-sequencing-to-build-a-quantitative-backtesting-model\/#Further_Reading\" >Further Reading<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span><strong>Introduction<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-text-align-left\"><br>In our previous article&#8221; <strong><a href=\"https:\/\/www.tejwin.com\/en\/insight\/industry-rotation-shipping-semiconductors\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/insight\/industry-rotation-shipping-semiconductors\/\">Shipping Leads, Semiconductors Follow? <\/a><\/strong> &#8220;we identified a recurring pattern in Taiwan\u2019s market: rallies in the<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong> shipping sector <\/strong><\/mark>often precede gains in <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">semiconductor stocks<\/mark><\/strong>. This article builds on that insight by transforming the observed rotation sequence into a quantitative investment strategy.<\/p>\n\n\n\n<p class=\"has-text-align-left\">By combining sector momentum signals, macroeconomic indicators, and rule-based allocation logic, we construct a backtesting model to simulate historical trades. The goal is to evaluate whether this \u201cShipping \u2192 Semiconductors\u201d signal\u2014when used within a broader economic context\u2014can deliver consistent excess returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Visualization_of_Industry_RSI_Values\"><\/span>Visualization of Industry RSI Values<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-text-align-center\"><strong><img decoding=\"async\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/8_AD_4nXdxNLUbTwldDZogwsO0UIVfwuHnasttKjLjcszKIGbIM9E9lcoJ9jkctNO4Ze1QaZeOU7KTpj7iFj9pldAkpqdu5MA42eeAbcyIwy8dL6uFWHaIiJTJHZv-ZVX5dw5aWkTJnUO1RwkeykFGq1irbjy2lNhrO3F8GkA.png\" style=\"\"><\/strong><\/p>\n\n\n\n<p>From the analysis presented in the previous article, covering the period from 2012 to early 2020, we can observe a clear rotational relationship between the RSI values of the shipping and semiconductor industries. The next step is to consider how we can leverage this rotational pattern to design a reliable investment strategy. To avoid look-ahead bias, we use post-2020 market data as the subject of our backtesting research, which makes our strategy analysis more robust.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strategy_Logic_Explanation_Combined_with_Economic_Signal_Lights\"><\/span><strong>Strategy Logic Explanation: (Combined with Economic Signal Lights)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>From the article&nbsp;<em><a href=\"https:\/\/www.tejwin.com\/en\/insight\/from-business-cycle-indicators-to-asset-rotation-a-quantitative-strategy-to-avoid-bear-markets\/\" data-type=\"link\" data-id=\"https:\/\/www.tejwin.com\/en\/insight\/from-business-cycle-indicators-to-asset-rotation-a-quantitative-strategy-to-avoid-bear-markets\/\"><strong>\u201cFrom Business Cycle Signal Lights to Asset Rotation<\/strong><\/a>\u201d<\/em>we learned that monitoring indicators can effectively help avoid bear market volatility\u2014<strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">holding equities only during bull markets and switching to short-term government bonds or other defensive assets during bear markets<\/mark><\/strong>\u2014while producing favorable backtesting results.<\/p>\n\n\n\n<p>Incorporating the observed sector rotation phenomenon&nbsp;<em>\u201cShipping \u2192 Semiconductors,\u201d<\/em>&nbsp;our strategy proposes that during bull market phases, once a sector rotation signal is detected, the originally held 0050 ETF is temporarily substituted with semiconductor-related stocks. After capturing the excess returns generated from capital rotation, the position is rotated back into the 0050 ETF. The expectation is that this dynamic allocation approach will further enhance the performance outcomes discussed in the earlier study. For benchmarking, the strategy is compared against the TAIEX Total Return Index (IR0001), hereafter referred to as the market index.<\/p>\n\n\n\n<p><strong>Operational Logic:<\/strong><br>The strategy activates under two conditions: a bullish macroeconomic phase and a sector rotation signal.<\/p>\n\n\n\n<p>When the monitoring indicator signals an upward phase, if the RSI value of the shipping index rises above 65 (indicating that the sector is at a relative high point and the rotation cycle is likely beginning), we initiate positions in representative semiconductor-related stocks. <\/p>\n\n\n\n<p>The holdings are maintained until the RSI of the semiconductor index increases by 15 points relative to the entry level (signaling the end of the rotation), at which point the semiconductor positions are closed and rotated back into the 0050 ETF. <\/p>\n\n\n\n<p>If the market transitions into a bear phase before the rotation cycle completes, all equity positions are liquidated and shifted into short-term bonds, consistent with the design outlined in the business cycle strategy.<\/p>\n\n\n\n<p><strong>Semiconductor Allocation:<\/strong><br>For exposure to the semiconductor sector, we construct a basket of ten representative Taiwan&#8217;s semiconductor companies, spanning the full supply chain from upstream foundries to midstream IC design and downstream packaging, testing, and memory:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Memory:<\/strong>&nbsp;Nanya Technology (2408), Taiwan\u2019s leading DRAM manufacturer, highly correlated with global memory pricing and supply-demand cycles.<br><\/li>\n\n\n\n<li><strong>Foundries:<\/strong>&nbsp;Taiwan Semiconductor Manufacturing Company (TSMC, 2330) and United Microelectronics Corporation (UMC, 2303) represent the leaders in advanced and mature process nodes, respectively; Vanguard International Semiconductor (VIS, 5347) specializes in 8-inch wafers, focusing on niche markets.<br><\/li>\n\n\n\n<li><strong>IC Design:<\/strong>&nbsp;MediaTek (2454), a global leader in mobile and communication chip design; Novatek (3034) and Raydium Semiconductor (4961), both key suppliers of display driver ICs within the panel supply chain.<br><\/li>\n\n\n\n<li><strong>Packaging &amp; Testing:<\/strong>&nbsp;ASE Technology Holding (3711), Powertech Technology (6239), and ChipMOS Technologies (3264), covering back-end packaging and testing services.<\/li>\n<\/ul>\n\n\n\n<p>These stocks collectively form the key structure of Taiwan\u2019s semiconductor industry, while also possessing sufficient liquidity and market capitalization, making them suitable for empirical backtesting and portfolio allocation simulations.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"509\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/\u3112-1024x509.png\" alt=\"\u7522\u696d\u8f2a\u52d5\" class=\"wp-image-35140\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112-1024x509.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112-300x149.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112-150x75.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112-768x382.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112-1536x764.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3112.png 1988w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Visualization of Monitoring Indicators, 0050 ETF, and U.S. Short-Term Treasury ETFs<\/figcaption><\/figure>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Strategy_Performance_Charts_Analysis\"><\/span><strong>Strategy Performance Charts &amp; Analysis<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"852\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/yyy-1024x852.png\" alt=\"\u7522\u696d\u8f2a\u52d5\" class=\"wp-image-35142\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy-1024x852.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy-300x250.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy-150x125.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy-768x639.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy-1536x1278.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/yyy.png 1790w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>The first performance chart highlights 5 instances of the \u201cShipping \u2192 Semiconductor\u201d rotation signal (marked in orange) detected during the recent bull market. Among them, 4 signals (2nd to 5th) successfully captured strong rallies in semiconductor stocks. The 2nd and 3rd signals\u2014both in 2020\u2014generated the most substantial gains, helping the strategy meaningfully outperform the TAIEX benchmark. While the 4th and 5th signals also aligned with semiconductor uptrends, their marginal outperformance was more limited, as semiconductors had already become the market\u2019s primary growth driver by then.<\/p>\n\n\n\n<p>The second chart overlays the business cycle score throughout the backtesting period. Most entry points aligned with the early expansion or recovery phases of the cycle, supporting the strategy\u2019s timing logic: <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">capital rotation tends to accelerate as economic conditions improve.<\/mark><\/strong><\/p>\n\n\n\n<p>The third chart presents leverage utilization. Aside from two short-lived spikes to 2.0\u2014caused by portfolio rebalancing during bear transitions\u2014leverage remained close to 1.0 throughout. This indicates that the strategy\u2019s returns were not driven by excessive leverage, and associated risks were well-contained.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"691\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-1024x691.png\" alt=\"\u7522\u696d\u8f2a\u52d5\" class=\"wp-image-35144\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-1024x691.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-300x202.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-150x101.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-768x518.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-1536x1036.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u622a\u5716-2025-05-20-\u4e0b\u53484.39.54-2048x1381.png 2048w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Finally, the drawdown chart shows that losses were generally limited to within \u201310%, reflecting strong downside control. The only major exception occurred during the COVID-19 shock in early 2020, when the portfolio\u2014primarily holding the 0050 ETF\u2014faced a temporary drawdown of \u201327%. This episode, driven by a black swan event, does not undermine the overall resilience of the strategy.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Multi-Strategy_Comparison\"><\/span><strong>Multi-Strategy Comparison<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"564\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/\u3115-1024x564.png\" alt=\"\u7522\u696d\u8f2a\u52d5\" class=\"wp-image-35146\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115-1024x564.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115-300x165.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115-150x83.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115-768x423.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115-1536x845.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/\u3115.png 1797w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>The chart above presents a comparison of the performance and risk of four different strategies during the backtesting period.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Red Line (Ind):<\/strong>&nbsp;Represents the&nbsp;<em>Industry Rotation Strategy<\/em>&nbsp;designed in this study, dynamically adjusted based on the information transmission relationship between shipping and semiconductors.<\/li>\n\n\n\n<li><strong>Blue Line (All Stock):<\/strong>&nbsp;A strategy that simply buys semiconductor stocks during bull markets and exits the market once a bear market signal appears.<\/li>\n\n\n\n<li><strong>Purple Line (All ETF):<\/strong>&nbsp;A strategy that simply holds the 0050 ETF during bull markets.<\/li>\n\n\n\n<li><strong>Gray Line (Benchmark):<\/strong>&nbsp;Represents the TAIEX Total Return Index as the market benchmark.<\/li>\n<\/ul>\n\n\n\n<p>From the cumulative return chart, the <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">all-stock strategy (blue line) achieved the highest total return<\/mark><\/strong>, but at the cost of significantly higher volatility. This is confirmed in the volatility chart, where its risk exposure remained consistently elevated across the backtest period.<\/p>\n\n\n\n<p>In contrast, the&nbsp;<strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Industry Rotation Strategy&nbsp;(red line) proposed in this study demonstrated stable performance with effective risk control.<\/mark><\/strong> While its return was slightly lower than the all-stock strategy, it clearly outperformed the ETF-only and benchmark strategies. Volatility was also kept at moderate levels\u2014between the all-stock and all-ETF approaches\u2014striking a healthy balance between upside potential and drawdown management.<\/p>\n\n\n\n<p>Importantly, the rotation strategy showed no signs of performance degradation due to rebalancing. On the contrary,<strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"> its ability to detect capital flows and time entry\/exit decisions contributed to a smoother equity curve, demonstrating real-world applicability for long-term investors.<\/mark><\/strong><\/p>\n\n\n\n<p><strong>Strategy Comparison Table and Analysis<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><thead><tr><th>Performance Indicators \/ Strategies<\/th><th class=\"has-text-align-right\" data-align=\"right\">Industry Rotation Strategy<\/th><th class=\"has-text-align-right\" data-align=\"right\">Bull Market Semiconductor Strategy<\/th><th class=\"has-text-align-right\" data-align=\"right\">Bull Market 0050 Strategy<\/th><th class=\"has-text-align-right\" data-align=\"right\">Benchmark<\/th><\/tr><\/thead><tbody><tr><td>Annualized Return<\/td><td class=\"has-text-align-right\" data-align=\"right\">28.58%<\/td><td class=\"has-text-align-right\" data-align=\"right\">33.23%<\/td><td class=\"has-text-align-right\" data-align=\"right\">21.24%<\/td><td class=\"has-text-align-right\" data-align=\"right\">12.047%<\/td><\/tr><tr><td>Cumulative Return<\/td><td class=\"has-text-align-right\" data-align=\"right\">257.52%<\/td><td class=\"has-text-align-right\" data-align=\"right\">327.48%<\/td><td class=\"has-text-align-right\" data-align=\"right\">165.40%<\/td><td class=\"has-text-align-right\" data-align=\"right\">77.97%<\/td><\/tr><tr><td>Annualized Volatility<\/td><td class=\"has-text-align-right\" data-align=\"right\">16.179%<\/td><td class=\"has-text-align-right\" data-align=\"right\">17.21%<\/td><td class=\"has-text-align-right\" data-align=\"right\">14.84%<\/td><td class=\"has-text-align-right\" data-align=\"right\">18.52%<\/td><\/tr><tr><td>Sharpe Ratio<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.64<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.75<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.37<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.71<\/td><\/tr><tr><td>Calmar Ratio<\/td><td class=\"has-text-align-right\" data-align=\"right\">1.04<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.98<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.77<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.45<\/td><\/tr><tr><td>Maximum Drawdown Period<\/td><td class=\"has-text-align-right\" data-align=\"right\">-27.60%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-34.07%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-27.60%<\/td><td class=\"has-text-align-right\" data-align=\"right\">-26.74%<\/td><\/tr><tr><td>Alpha<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.23<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.28<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.16<\/td><td class=\"has-text-align-right\" data-align=\"right\">0<\/td><\/tr><tr><td>Beta<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.39<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.42<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.39<\/td><td class=\"has-text-align-right\" data-align=\"right\">0.93<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\">Note:&nbsp;The Calmar ratio is calculated as the annualized return divided by the maximum drawdown over the period. It measures the relationship between return and loss, similar in concept to the Sterling ratio. A higher value indicates better performance.<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>While the all-stock strategy achieved the highest return and Sharpe ratio, it also came with the largest drawdowns and volatility, making it more suitable for investors with higher risk tolerance.<\/p>\n\n\n\n<p>In contrast, the Industry Rotation Strategy offers a more balanced profile:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Its annualized return of 28.58% significantly outperformed both the 0050 ETF strategy and the market benchmark.<\/li>\n\n\n\n<li>It maintained moderate volatility (16.18%) and a maximum drawdown comparable to the ETF strategy, reflecting effective downside risk control.<\/li>\n\n\n\n<li>It achieved the highest Calmar ratio (1.04) among all four strategies, indicating strong returns relative to its worst-case loss.<\/li>\n\n\n\n<li>The Alpha of 0.23 confirms that it consistently delivered excess returns beyond market exposure, while its low Beta of 0.39 suggests lower sensitivity to overall market fluctuations.<\/li>\n<\/ul>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Overall, the Industry Rotation Strategy successfully balances growth and risk, demonstrating its robustness as a practical and resilient investment approach.<\/mark><\/strong><\/p>\n\n\n\n<p><em>Disclaimer: This analysis is for reference only and does not constitute any product recommendation or investment advice.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion_Data-Driven_Rotation_Strategy_Powered_by_TEJ\"><\/span><strong>Conclusion: Data-Driven Rotation Strategy, Powered by TEJ<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This study demonstrates how sector rotation signals\u2014like the lead-lag between shipping and semiconductors\u2014can be turned into a rules-based quantitative strategy with strong performance and controlled risk.<\/p>\n\n\n\n<p>Behind every effective strategy is a reliable data foundation. TEJ offers <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">high-quality, point-in-time<\/mark><\/strong> datasets that power research, backtesting, and decision-making. Whether you&#8217;re building asset allocation models or sector-based signals, TEJ\u2019s solutions help you move from idea to execution with confidence.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">\ud83d\udc49 Explore TEJ&#8217;s core data services:<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><a href=\"https:\/\/www.tejwin.com\/en\/solution\/market-data\/?utm_source=chatgpt.com\">Market Data Solution<\/a><\/strong> \u2013 Delivers comprehensive market insights, including stock prices, institutional buy-sell activity, major broker trading flows, margin trading data, and more.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong><a href=\"https:\/\/www.tejwin.com\/en\/solution\/fundamental-data\/?utm_source=chatgpt.com\">Fundamental Data Solution<\/a><\/strong> \u2013 Offers structured, point-in-time company profiles to help you analyze a firm&#8217;s core operations and business fundamentals.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<div style=\"border: 1px black; border-style: solid none; text-align: center; border-color: #296580; padding: 24px; margin-top: 24px; margin-bottom: 24px;\">\n<p style=\"margin: 0px; font-size: 24px; font-weight: bold; line-height: 1.5;\"><strong data-start=\"166\" data-end=\"234\">The Most Comprehensive Taiwan Market Data Analysis for Investors<\/strong><\/p>\n<div style=\"margin-top: 32px;\"><a style=\"border: none; border-radius: 4px; background-color: #296580; color: white; font-size: 20px; width: fit-content; text-decoration: none; padding: 12px 30px 12px 30px;\" href=\"https:\/\/www.tejwin.com\/en\/solution\/\" target=\"_blank\" rel=\"noopener\">View All Data Solutions<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Further_Reading\"><\/span>Further Reading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/insight\/\u5f9e\u666f\u6c23\u71c8\u865f\u5230\u8cc7\u7522\u8f2a\u52d5\uff1a\u4e00\u5957\u907f\u958b\u718a\u5e02\u7684\u91cf\u5316\u7b56\u7565-n\/\">From Business Cycle Indicators to Asset Rotation: A Quantitative Strategy to Avoid Bear Markets<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/insight\/\u9ea5\u514b%EF%BC%8E\u58a8\u83f2\u9ad8\u79d1\u6280\u80a1\u6295\u8cc7\u98a8\u96aa\u8a55\u4f30\u6cd5\u5247-tej\u53f0\u7063\u7d93\u6fdf\/\">Michael Murphy\u2019s Risk Assessment Rules for Investing in High-Tech Stocks<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/insight\/\u67e5\u723e\u58eb%EF%BC%8E\u5e03\u862d\u5e1d-\u50f9\u503c\u578b\u9078\u80a1\u6cd5\u5247\uff1a\u6253\u9020\u5b89\u5168\u908a\u969b\u7684\/\">Charles Brandes\u2019 Value Investing Principles : Building a Portfolio with a Margin of Safety<\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In our previous article&#8221; Shipping Leads, Semiconductors Follow?  &#8220;we identified a recurring pattern in Taiwan\u2019s market: rallies in the shipping sector often precede gains in semiconductor stocks. This article builds on that insight by transforming the observed rotation sequence into a quantitative investment strategy.<\/p>\n","protected":false},"featured_media":35139,"template":"","tags":[2962,2371,2988,3477],"insight-category":[689,885],"class_list":["post-38999","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-market-data","tag-python","tag-quantitative-analysis","tag-semiconductor","insight-category-market-research","insight-category-tquant-lab"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/38999","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":13,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/38999\/revisions"}],"predecessor-version":[{"id":39357,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/38999\/revisions\/39357"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/35139"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=38999"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=38999"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=38999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}