Theory -- Mean Reversal to (Today's Revenue) / (Share Price)

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Theory -- Mean Reversal to (Today's Revenue) / (Share Price)

posted Feb 23, 2019

Seeking Help Getting Started Mean Reversion Research Fundamentals

I have this theory that high growth companies keep returning to the 4 years daily mean of (Today's Revenue) / (Share Price) and the rest of the fundamentals is noise in the long term. I checked the theory manually in Google Sheets and there are a lot of positive signs, but it needs proper backtesting on Quantopian.

Here are some screenshots from the Google Sheets:
https://i.imgur.com/HPaR7dk.png
https://i.imgur.com/vYEctfo.png

By high growth companies I mean:
- TSLA -- 15.10% (avg QoQ growth)
- FB -- 11.20%
- BABA -- 10.30%
- TCEHY -- 8.60%
- GOOGL -- 6.80%
- NFLX -- 6.80%
- AMZN -- 6.50%
- ADBE -- 5.60%
- SBUX -- 3.30%

It's quite easy to estimate what each of those companies will do in any particular day, based on the last X number of quarters of information. On significant deviations from the daily mean, for example, lower 20% percentile or higher 80% percentile - we can buy/sell those stocks. Also, we will continuously rebalance. In case that all stocks are "overpriced" - we should buy some SPXS while keeping most of the cash available.

Is there an algorithm similar to this? I can make code small changes, but building from scratch seems unfeasible to me so far...

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.