AI Backtest

Backtest: Buy XOP at the close when its 10-day realized volatility is in the bottom qua...

14.10%
Return on capital

There's a seductive logic to buying an E&P basket when it compresses into low realized volatility while crude still holds above its trend line: the commodity tailwind remains, and positioning has supposedly been squeezed out. The backtest suggests that logic is fragile.

Testing that rule on XOP—entry at the close when 10-day RV is in the bottom quartile of the prior 20 sessions and Brent is above its 50-day SMA, exit after 10 trading days or a close below the 20-day—returned 14.10% on $100,000 across 35 closed trades. The win rate was 41.2%. SPY buy-and-hold over the same window returned 76.34%, leaving the strategy trailing by 62.23 points.

The detailed report below walks through the full trade-by-trade results and what that benchmark gap implies for the core thesis.

The strategy

Buy XOP at the close when its 10-day realized volatility is in the bottom quartile of its prior 20 sessions and Brent crude closes above its 50-day simple moving average; exit after 10 trading days or when XOP closes below its 20-day simple moving average, whichever comes first. E&P baskets that compress into low realized volatility while crude holds trend tend to resolve higher because the commodity tailwind is still in place but positioning has been squeezed out.

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 XOP at the close when its 10-day realized volatility is in the bottom quartile of its prior 20 sessions and Brent crude closes above its 50-day simple moving average; exit after 10 trading days or when XOP closes below its 20-day simple moving average, whichever comes first. E&P baskets that compress into low realized volatility while crude holds trend tend to resolve higher because the commodity tailwind is still in place but positioning has been squeezed out.

The key numbers

Return on capital
14.10%
total P&L over starting capital
Total P&L
$14,104.77
Closed trades
35
Win rate
41.2%
share of closed trades in profit
vs SPY
-62.23%
excess return over SPY buy-and-hold

The charts

Equity curve (growth of 100)

The takeaway

The strategy returned +14.10% on $100,000 starting capital across 35 closed trades with a 41% win rate. Over the same window SPY buy-and-hold returned +76.34%, so the strategy finished trailing the benchmark by 62.23 points. Best single trade +12.35%, worst -9.93%.

The fine print