Implementing a Sector Rotation Strategy In QuantConnect (Python) ๐
In this tutorial Iโd like to go over the implementation of a simple Sector Rotation strategy in QuantConnect based on a momentum factor derived from 6-month and 12-month price changes.
This story is solely for general information purposes, and should not be relied upon for trading recommendations or financial advice. Source code and information is provided for educational purposes only, and should not be relied upon to make an investment decision. Please review my full cautionary guidance before continuing
What is QuantConnect?
QuantConnect is an open-source, cloud-based algorithmic trading platform, founded in 2011 by Jared Broad. It allows users to design, test, and deploy trading strategies across various financial markets including equities, FX, futures, options, and cryptocurrencies. The platform caters to a diverse audience ranging from individual traders to hedge funds and brokerages.
The key features of QuantConnect include extensive market data for backtesting strategies, the Lean Algorithmic Trading Engine for local development and customization, and support for Python and C# coding. Additionally, its Alpha Streams feature lets users license their trading strategies to funds. While basic backtesting is free, live trading and advanced features require a subscription.
QuantConnect combines comprehensive data resources, a robust trading engine, and a supportive community, making it a valuable tool for those in the field of quantitative finance and algorithmic trading.
Useful links:
What are Sector Funds?
Sector funds are types of mutual funds or exchange-traded funds (ETFs) that invest in companies from a particular industry, such as energy or healthcare. These funds group together companies that provide similar products or services.
Sector funds are offered by several companies such as Janus, iShares or SPDR. In this tutorial we will use the funds provided by SPDR:
Materials - XLB
Communication Services - XLC
Energy - XLE
Financials - XLF
Industrials - XLI
Technology - XLK
Consumer Staples - XLP
Real Estate - XLRE
Utilities - XLU
Healthcare - XLV.