PARTIAL · regime-flips
Hypothesis
Ranking alts by trailing return and going long the top decile / short the bottom decile captures a cross-sectional momentum premium, market-neutral.
Math — cross-sectional rank portfolio
Long the top-decile, short the bottom-decile by trailing return $r_{i,t-k:t}$:
$$ w_{i,t} \propto \text{rank}_i\big(r_{i,t-k:t}\big) - \overline{\text{rank}} $$
Method
Decile sort on 30d trailing return, dollar-neutral long/short, weekly rebalance, borrow + fees applied; tested against the well-known "momentum crash" episodes.
Results
| Gross long-short return | positive in trends |
| Momentum crashes (sharp rebounds) | severe |
| Net Sharpe | 0.3 |
| Correlation to TSMOM (N-105) | high |
The cross-sectional cousin of N-105 — a real premium that periodically crashes when beaten-down losers violently rebound (the classic momentum crash). Net Sharpe ~0.3 and largely redundant with time-series momentum. A minor diversifier at most, with explicit crash-risk management.
Cross-sectional and time-series momentum are two views of the same crowded trade — and both hand back months of gains in a single mean-reversion crash. Diversification between them is mostly an illusion.