- Jun 13, 2025
- Strategy
The price movements in financial markets may seem complex, but they are fundamentally driven by the underlying logic of “value reversion” — the HSAM Neutral Strategy (NS) is built around this core principle, combining value investing principles with technical analysis tools to identify sustainable profit opportunities within regular price fluctuations. This strategy does not rely on the direction of market movements but instead captures the high-frequency back-and-forth movements of prices within a range, achieving the unique advantage of “profiting without a directional bias.”
Value Reversion: The Core Driving Force of the Strategy
The essence of the NS strategy is the systematic application of the “price returning to its intrinsic value” principle. Taking the bond market as an example, the price of a corporate bond will fluctuate around its intrinsic value when its credit rating is stable and cash flow is normal. When market sentiment drives prices to rise above the intrinsic value in the short term, the strategy identifies this as an overvaluation signal and reduces holdings; when prices fall below the intrinsic value due to short-term selling, the strategy identifies this as an undervaluation opportunity and increases holdings. This approach does not predict price direction but instead exploits the deviation between price and value for range trading, waiting for profits from the market's self-correction.
In ETF investing, the value reversion logic of the NS strategy is more straightforward. For example, if an industry ETF experiences short-term premiums or discounts due to capital inflows or outflows without changes in its fundamentals, the strategy tracks the deviation between the ETF's net asset value (NAV) and its price. It sells when there is a premium and buys when there is a discount, exiting the position when the price returns to the NAV. This trading does not involve judgments about the industry's prospects but relies solely on the price-value deviation correction mechanism.
Technical Validation: Precise Identification of Volatility Patterns
To ensure the effectiveness of the value reversion pattern, the NS strategy incorporates multi-dimensional technical analysis tools for validation. In terms of pattern analysis, the strategy focuses on typical range-bound patterns such as rectangle consolidation and flag consolidation, which often indicate regular price fluctuations within a certain range. Taking gold prices as an example, when the price forms a rectangle consolidation pattern, the strategy identifies the upper and lower boundaries as trading limits, shorting when the price touches the upper boundary and going long when it touches the lower boundary.
Volume and volatility indicators provide supplementary validation for volatility patterns. When prices fluctuate within a range, if volume expands as prices rise and contracts as prices fall, it indicates that the volatility is recognized by market funds, making the pattern more sustainable. If volatility suddenly spikes, the strategy will temporarily stand aside to avoid interference from abnormal volatility. By combining technical indicators with value reversion logic, the NS strategy can identify high-probability volatility opportunities.
Strategy Advantage: Balancing Low Risk and High Frequency
The core competitiveness of the NS strategy lies in balancing “low-risk volatility trading” with “high-frequency opportunity capture.” Since each trade's stop-loss level is set at the boundary of the range, individual risks are controllable; meanwhile, high-frequency trading opportunities accumulate returns through incremental gains. Taking the cryptocurrency market as an example, while the price fluctuations of a stablecoin pegged to the US dollar within a range are small, there may be dozens of regular fluctuations daily. The NS strategy uses algorithmic trading to capture these opportunities, achieving profits while controlling risk.
Additionally, the strategy's neutral nature inherently provides resistance to market volatility. During the severe fluctuations in the global commodities market in 2023, HSAM's NS strategy, through range trading of commodities like copper and aluminum, not only avoided one-sided volatility risks but also achieved returns exceeding the market average. This “neither long nor short, only trading volatility” logic offers investors a new perspective on profitability beyond traditional strategies. In financial markets, regardless of bull or bear cycles or volatility, there is always a strategy that can uncover stable profit opportunities through unique logic—the Neutral Strategy (NS) on the HSAM platform is precisely such a strategy. Its core principle is rooted in the fundamental laws of market operation: when the overall market environment and core factors remain unchanged, the price movements of individual products typically follow their original trajectories, exhibiting identifiable range-bound fluctuations and value reversion characteristics. The NS strategy captures such high-frequency,规律性波动, establishing a stable profit logic across various market conditions.
Strategy Core: From Market Essence to Opportunity Capture
The underlying logic of the NS strategy is based on a deep understanding of market “inertia.” Taking stocks as an example, when the fundamentals, industry position, and macroeconomic drivers of a particular stock have not undergone significant changes, its price may fluctuate repeatedly within a relatively narrow range. This fluctuation is not random movement but rather a regular fluctuation centered around intrinsic value — when prices temporarily surge above the value center, it will decline due to selling pressure; when prices fall excessively, they will rebound due to buying support. The NS strategy uses technical analysis tools to precisely identify the support and resistance levels of such range fluctuations, reducing holdings when prices reach resistance levels and increasing holdings when prices fall back to support levels, accumulating profits through high-frequency two-way trading.
In the commodity futures market, this pattern is even more pronounced. For example, in stable supply-demand phases, crude oil prices often experience minor fluctuations due to short-term capital speculation or geopolitical events, but remain constrained by fundamentals in the long term. The NS strategy uses indicators such as trading volume, open interest, and price patterns to determine the boundaries of fluctuations, executing low-buy, high-sell operations within the range. Even with limited volatility, as long as the pattern occurs frequently, the strategy can achieve profits through the accumulation of trading volume.
Market Adaptability: Profit Resilience Across Bull and Bear Markets
The unique advantage of the NS strategy lies in its strong adaptability to market conditions. Traditional trend strategies rely on one-sided market trends, while the NS strategy performs exceptionally well in volatile markets. When the market is stuck in a range-bound consolidation phase with no clear upward or downward trend, most strategies struggle to generate profits. However, the NS strategy can sustainably profit by capturing volatility patterns. During a period of global stock market volatility in a certain quarter of 2024, the S&P 500 Index fluctuated within a narrow range. HSAM's NS strategy achieved stable profit accumulation through range trading of its component stocks, validating the strategy's effectiveness in environments without clear trends.
In bear markets, the NS strategy also demonstrates its effectiveness. When the overall market is declining but individual products exhibit range-bound volatility due to their resistance to declines or short-term positive factors, the strategy can construct a neutral portfolio by selecting specific targets to identify local volatility opportunities in a declining market. For example, during a broad market decline, a leading stock in the pharmaceutical sector formed an independent volatility range due to stable performance, and the NS strategy achieved counter-trend returns through high-frequency trading.
Risk Control: Steady Performance Under Volatility Patterns
The NS strategy's risk control system is deeply integrated with its profit logic. Since the strategy focuses on capturing regular volatility patterns, stop-loss levels for each trade can be precisely set at the boundaries of volatility ranges. When prices break through pre-set resistance or support levels, it is deemed that the volatility pattern has failed, triggering the strategy's automatic stop-loss mechanism to limit losses to a finite range. Additionally, the strategy diversifies across multiple eligible assets to mitigate the impact of abnormal volatility in a single product on the overall portfolio. For example, in the foreign exchange market, the NS strategy can simultaneously track the volatility ranges of multiple currency pairs such as EUR/USD and GBP/USD, using multi-asset rotation trading to smooth the return curve.
HSAM's Neutral Strategy NS acts like a “volatility hunter” in the market, relying not on one-sided trends but on precise understanding of price patterns and high-frequency trading logic to build a stable profit model across various market conditions. For investors seeking low volatility and steady returns, the NS strategy offers a reliable option to navigate market cycles.