# Writing Algorithms

## Strategy Library

### Introduction

The Strategy Library is a collection of tutorials written by the QuantConnect team and community members. Review these tutorials to learn about trading strategies found in the academic literature and how to implement them with QuantConnect/LEAN.

### Tutorials

Strategy Name |
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CAPM Alpha Ranking Strategy on Dow 30 Companies Applies CAPM model to rank Dow Jones 30 companies. |

Combining Mean Reversion and Momentum in Forex Market Combines momentum and mean reversion techniques in the forex markets. |

Pairs Trading-Copula vs Cointegration Applies Copula and Cointergration method to pairs trading. |

The Dynamic Breakout II Strategy A demonstration of dynamic breakout II strategy. |

Dual Thrust Trading Algorithm A demontration of Dual Thrust Intraday strategy. |

Can Crude Oil Predict Equity Returns Applies regression method to predict the return from the stock market and compare it to the short-term U.S. T-bill rate. |

Intraday Dynamic Pairs Trading using Correlation and Cointegration Approach A high frequency pairs trading algorithm based on cointegration. |

The Momentum Strategy Based on the Low Frequency Component of Forex Market Applies high frequency filter to the momentum strategy. |

Stock Selection Strategy Based on Fundamental Factors MorningStar Fundamental factors universe selection algorithm. |

Short-Term Reversal Strategy in Stocks A short term reversal algorithm which gives the opposite signal by analyzing recent period price action. |

Fundamental Factor Long Short Strategy A basic monthly rebalance long short algorithm based on fundamental factors. |

Asset Class Trend Following Selects ETFs over ten-month moving average and assigns an equally weighted allocation. Source: Quantpedia |

Asset Class Momentum Selects ETFs in different asset classes with the highest momentum and assigns an equally weighted allocation. Source: Quantpedia |

Residual Momentum Constructs a long/short portfolio based on trailing residual momentum normalized by its standard deviation Source: Quantpedia |

Sector Momentum Selects ETFs in different sectors with the highest momentum and assigns an equally weighted allocation. Source: Quantpedia |

Overnight Anomaly Buy SPY ETF at its closing price and sell it at the opening each day. Source: Quantpedia |

Forex Carry Trade Goes long the currency with the highest central bank interest rate and goes short the currency with the lowest interest rate. Source: Quantpedia |

Volatility Effect in Stocks Constructs equally weighted portfolios by selecting stocks with the lowest volatility in the past one year. Source: Quantpedia |

Forex Momentum Goes long currencies with strongest 12 month momentum against USD and goes short currencies with the lowest 12 month momentum against USD. Source: Quantpedia |

Pairs Trading with Stocks Looks for the security that minimizes the sum of squared deviations and long-short position is opened when pair prices have diverged by multiple of standard deviations. Source: Quantpedia |

Short Term Reversal Goes long stocks with the lowest return in the previous month and goes short stocks with the greatest return from the previous month. Source: Quantpedia |

Momentum Effect in Stocks Goes long stocks with the best 12-month momentum in the large-cap universe. Source: Quantpedia |

Momentum Effect in Country Equity Indexes Goes long stocks with the best 12-month momentum in the country equity indexes ETFs. Source: Quantpedia |

Mean Reversion Effect in Country Equity Indexes Goes long country equity indexes ETFs with the worst 36-month return and short ETFs with the best 36-month return. Source: Quantpedia |

Liquidity Effect in Stocks Goes long stocks with the lowest turnover and short on stocks with the highest turnover from the lowest market-cap quartile. Source: Quantpedia |

Volatility Risk Premium Effect Sells at-the-money straddle with one month until maturity and buys an offsetting 15% out-of-the-money puts each month. Source: Quantpedia |

Momentum Effect in Commodities Futures Goes long commodity futures with the highest momentum and short on futures with the lowest momentum. Source: Quantpedia |

Small Capitalization Stocks Premium Anomaly Goes long stocks with the lowest market capitalization and rebalances the portfolio once a year. Source: Quantpedia |

Paired Switching Goes long asset with better performance over the last period and rebalances portfolio every quarter. Source: Quantpedia |

Term Structure Effect in Commodities Buys each month the 20% of commodities with the highest roll-returns and shorts the 20% of commodities with the lowest roll-returns and holds the long-short positions for one month. Source: Quantpedia |

Momentum Effect Combined with Term Structure in Commodities Portfolios are formed based on roll returns and the algorithm goes long and short contracts with the highest and lowest one-month performance. Source: Quantpedia |

Book-to-Market Value Anomaly Quintile portfolios are formed based on the Book-to-Market ratio and the highest quintile is held for one year. Source: Quantpedia |

Gold Market Timing Goes long gold when the Fed model shows that the market is undervalued (the earnings yield is higher than the bond yield and their ratio is at least 2). Source: Quantpedia |

Turn of the Month in Equity Indexes Buys SPY the day before the end of the month and liquidates position on 3rd trading day of new month. Source: Quantpedia |

Momentum - Short Term Reversal Strategy Goes long stocks with the decreasing return from the winner group and short stocks with the increasing return from the loser group. Source: Quantpedia |

Pairs Trading with Country ETFs Identifies the price divergence from two highly correlated country ETFs and takes a market neutral position. Source: Quantpedia |

Sentiment and Style Rotation Effect in Stocks Creates long-short positions of growth and value stocks based on the investment sentiment. Source: Quantpedia |

Asset Growth Effect Creates long-short positions of stocks based on the annual change of their total assets. Source: Quantpedia |

Momentum and State of Market Filters Goes long and short stocks with the highest and lowest six-month momentum respectively if the previous 12 months return on the broad market index was positive. Source: Quantpedia |

Accrual Anomaly Decile portfolios are formed based on balance sheet based accruals and highest decile is shorted while lowest decile is bought for a year. Source: Quantpedia |

Momentum in Mutual Fund Returns Forms a long-short portfolio of asset management firms based on trailing rate of change and nearness to trailing high. Source: Quantpedia |

Momentum and Style Rotation Effect Goes long style index ETF with the highest 12-month momentum and short ETF with the lowest 12-month momentum. Source: Quantpedia |

Trading with WTI BRENT Spread Goes long the spread if the spread is below 20-day moving average and short if the spread is above 20-day moving average. Source: Quantpedia |

Momentum Effect in REITs Tercile portfolios are formed based on momentum and the best performing portfolio is held. Source: Quantpedia |

Option Expiration Week Effect Goes long S&P 100 index ETF during option expiration week and stays in cash during other days. Source: Quantpedia |

Earnings Quality Factor Goes long stocks with high earnings quality and short stocks with low earnings quality based on composite factor score. Source: Quantpedia |

January Effect in Stocks Invests into small cap stocks at the beginning of each January and stays invested in large cap stocks for rest of the year. Source: Quantpedia |

Momentum and Reversal Combined with Volatility Effect in Stocks Goes long on stocks from the highest performing quintile from the highest volatility group and short on stocks from the lowest performing quintile from the highest volatility group. Source: Quantpedia |

ROA Effect within Stocks Goes long on stocks with highest ROA and short stocks with the lowest ROA from each market capitalization group. Source: Quantpedia |

January Barometer Invested in equity market with ETF only if January return is positive otherwise switch investments to T-Bills. Source: Quantpedia |

Lunar Cycle in Equity Market Goes long in emerging market index ETF 7 days before the new moon and switch to a short position on emerging market index ETF 7 days before the full moon. Source: Quantpedia |

VIX Predicts Stock Index Returns Goes long on equity index ETF if the VIX is in the highest percentile short if VIX is in the lowest percentile in the last two-year history. Source: Quantpedia |

Combining Momentum Effect with Volume Goes long stocks with the highest volume from the top momentum decile and short stocks with the highest volume from the bottom momentum decile. Source: Quantpedia |

Short Term Reversal with Futures Goes long (short) on futures from the high-volume, low-open interest group with the lowest (greatest) returns in the previous week. Source: Quantpedia |

Pre-holiday Effect Invests in equity market 2 days preceding holiday days and stays in cash during the other trading days. Source: Quantpedia |

Beta Factors in Stocks Goes long stocks with the bottom beta and short stocks with the top beta, securities are weighted by the ranked betas. Source: Quantpedia |

Exploiting Term Structure of VIX Futures Buys or sells the nearest VIX futures based on the daily roll and hedge against the open positions with E-mini S&P500 futures. Source: Quantpedia |

12 Month Cycle in Cross-Section of Stocks Returns Reviews the returns from last January, going long on the top 10% winners and short the bottom 10%. Source: Quantpedia |

Momentum Effect in Stocks in Small Portfolios Goes long in the 10 stocks with the highest performance and goes short in the 10 stocks with the lowest performance in the previous one year. Source: Quantpedia |

Value Effect within Countries Invests in the cheapest 33% of country ETFs according to CAPE ratios. Source: Quantpedia |

Beta Factor in Country Equity Indexes Goes long on the low-beta portfolio and short on the high-beta portfolio in country indexes ETFs. Source: Quantpedia |

Price to Earnings Anomaly Invests in stocks with low P/E ratio. |

Fama French Five Factors Stock selecting strategy based on Fama-French Five Factors Model. Source: NYU |

Mean-Reversion Statistical Arbitrage Strategy in Stocks Apply statistical arbitrage to take advantage of pricing inefficiencies in stocks. Source: NYU |

Expected Idiosyncratic Skewness Stock selection strategy that calculates expected idiosyncratic skewness using Fama-French three-factor model, sorts stocks based on the calculated skewness, and longs the bottom 5%. Source: NYU |

Risk Premia in Forex Markets A strategy based on asymmetric tail risks and excess returns in forex markets. Source: NYU |

Seasonality Effect based on Same-Calendar Month Returns A strategy that takes long and short positions based on historical same-calendar month returns Source: NYU |

Standardized Unexpected Earnings Stock selection strategy that calculates the unexpected earnings, standardizes the unexpected earnings, goes long on the top 5%, and rebalances the portfolio monthly. Source: NYU |

Price and Earnings Momentum A momentum strategy based on quarterly returns and earnings growth Source: NYU |

Improved Momentum Strategy on Commodities Futures An advanced momentum strategy that modifies the basic momentum strategies by introducing Baltas and Kosowski weights and rebalances the portfolio monthly. The new weighing scheme incorporates trend strength into the trading signal, uses an efficient volatility estimator, and adds a dynamic leverage mechanism. Source: NYU |

Commodities Futures Trend Following A simple trend following strategy on commodities futures. Source: NYU |

Forecasting Stock Prices using a Temporal CNN Model Applying a Temporal Convolutional Neural Network to forecasting future stock prices. Source: Tampere University |

Leveraged ETFs with Systematic Risk Management We apply Simple Moving Averages to manage the risk of holding leveraged ETFs in an attempt to beat the S&P500 Source: The Lead-Lag Report |

Ichimoku Clouds in the Energy Sector A techincal indicator crossover strategy trading the largest energy companies. Source: SSRN |

Intraday ETF Momentum A momentum strategy based on returns of the market open Source: NYU |

Intraday Arbitrage Between Index ETFs A strategy that tracks the price paths of two correlated ETFs and takes advantage of mis-pricings that arise when the price paths diverge Source: SSRN |

Optimal Pairs Trading Mathematically Deriving the Optimal Entry and Liquidation Values of a Pairs Trading Process Source: arXiv |

G-Score Investing Applying G-Score Investing to Invest in a Portfolio of Technology Stocks Source: SSRN |

SVM Wavelet Forecasting Forecasting EURJPY prices with an SVM Wavelet model Source: Academia |

Gradient Boosting Model Forecasts future intraday returns with a gradient boosting model trained on technical indicators Source: arXiv |

Using News Sentiment to Predict Price Direction of Drug Manufacturers Analyzes the news releases of drug manufacturers and places intraday trades for the stocks with positive news. Source: arXiv |

Gaussian Naive Bayes Model Forecasts the next day's return of technology stocks by fitting a gaussian naive bayes model to the historical returns of the technology sector constituents. Source: Academia |