dennisthiessenandClaude Opus 5.5
231372fb3a
- The breakeven study grades at the shadow book's capacity AND risk per trade, and labels each with where it came from. A missing setting row now reads "shadow_book default" instead of crediting the setting; the committed report said shadow_book_capacity though the snapshot has no such row. - _production_book_config reads strategies through the same _portfolio_monitor_strategies() hook as the monitor. - breakeven_gate_reset is rejected when there is no post-stop episode or cooldown for it to start, and the study skips its diagnostic arm for a book without one, so a production config change cannot abort the run. - identical_to_control is renamed ties_control_on_graded_metrics and needs real values: be_2r ties on every graded metric but still changed 2 trades. - _BookConfig drops an unused field and hashes by identity; the min-R:R sweep swaps its gate in with dataclasses.replace instead of passing it. - New tests cover the parity guard's success path, the no-config fallback and the gate-reset check. The breakeven report is regenerated: every row, diagnostic row and the parity check are identical; only the labels, the risk fields and the renamed flag changed. Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
81 lines
4.7 KiB
Markdown
81 lines
4.7 KiB
Markdown
# Residual normalization — findings
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**2026-09-08: closed negative at the signal screen. Keep production unchanged.**
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The proposed normalization did not meet the rule frozen in
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[the experiment protocol](residual-normalization.md), and its point estimates
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did not improve on the current momentum signal. No portfolio replay was run:
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the protocol requires a passing signal screen before that stage.
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The candidate used the production SPY-adjusted 12-1 return sum divided by sample
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standard deviation of the same 231 daily adjusted returns. All comparisons used
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identical as-of dates and 30-SPY-session forward-return endpoints. No new factor,
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lookback, volatility weight, sizing rule, or exit was tested.
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| Era | Non-overlapping windows | Current signal, matched coverage | Normalized signal | Difference |
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|---|---:|---:|---:|---:|
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| Full period | 73 | 0.01446 | 0.01284 | -0.00162 |
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| Before 2021 | 30 | 0.00776 | 0.00496 | -0.00280 |
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| From 2021 | 42 | 0.02377 | 0.02259 | -0.00118 |
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Values are mean **Spearman information coefficients (IC)**: how well signal
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ordering agrees with subsequent stock returns. They are neither Sharpe ratios
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nor trading returns. Higher is better for this positive-momentum hypothesis.
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The candidate needed full-period IC >= 0.03, at least 12 windows, and positive
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mean IC in both eras. It passed the count and era-sign conditions but failed the
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0.03 threshold. The rule was evaluated before rounding.
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The paired normalized-minus-current IC difference has a 95% moving-block interval
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of **[-0.00496, +0.00156]**. This spans zero: the study does not establish that
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normalization is worse, and it supplies no convincing improvement evidence.
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The mean top-minus-bottom-quintile 30-session return spread also fell, from
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**0.967% to 0.751%**. That is an unconditional diagnostic, not the P&L of the
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long-only, gated, capital-constrained production book.
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**Coverage and checks**
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- The snapshot completion manifest matches 4,650 registry tickers, 5,081,073
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OHLCV rows, and 4,144 research-only names. The experiment used the remaining
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506 production-universe registry names, averaging 485.4 paired stocks per
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retained window.
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- Actual retained as-of dates run from **2017-01-06 to 2026-05-01**; the final
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forward endpoint is **2026-06-15**. Later dates cannot necessarily add another
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complete non-overlapping 30-session window. SPY history starts in January
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2016, so a full one-year signal cannot start in July 2016.
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- One retained window crosses the 2021 boundary and belongs to the full-period
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result only, explaining why the era counts sum to 72 rather than 73.
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- The unrestricted production control had **35,441** retained stock/date cells;
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paired control and treatment each had **35,433**. Its mean IC was 0.01447,
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essentially the same as paired control. Coverage restriction did not account
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for the observed result.
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- Numerator parity was checked against the production implementation on each
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eligible evaluated cell. The snapshot and frozen source hashes were unchanged
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across the run. SQLite was opened read-only.
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- Twelve targeted tests passed, including numerical invariance, production
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parity, lookahead exclusion, zero-variance handling, missing-data pairing,
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calendar overlap, and an end-to-end screen check. Ruff passed for the runner
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and its tests. The existing Python runtime was usable outside the filesystem
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sandbox; no environment replacement was needed.
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- A 2026-10-10 code review added four tests (missing prices, file release,
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paired-coverage guard, source ids) with the runner fixes they cover. The
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report was regenerated with the fixed runner; its screen results are
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byte-identical to the original run.
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**Interpretation and decision**
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My proposed mechanism was plausible but unsupported by this experiment. Do not
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add normalization to production or search denominator variants on this history.
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This ends this specific experiment, not all possible residual-momentum research.
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The current signal also falls below 0.03 on this particular long-history screen.
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That cautions against treating its predictive evidence as universally strong;
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it does not by itself measure or invalidate the complete production book. The
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unconditional universe, true session spacing, dates, and return objective differ
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from earlier setup/portfolio studies. Historical constituents are still projected
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backward, this history has already been inspected, and the bootstrap intervals
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remain exploratory. No new CAGR, drawdown, cost-stress, or live result is claimed.
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**Artifacts:** [machine-readable results](../../reports/residual-normalization-20260908.json),
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[generated tables](../../reports/residual-normalization-20260908.md),
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[runner](../../scripts/run_residual_normalization.py), and
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[tests](../../tests/unit/test_residual_normalization.py).
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