Developing A New Strategy: SC Ratio

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Horaenaut
Posts: 102
Joined: Mon Apr 29, 2019 11:18 am

Developing A New Strategy: SC Ratio

Post by Horaenaut »

I've been watching the S share price to C share price ratio as it has had huge swings over the past two years, and I think it can be used as a viable trading strategy for folks who are generally holding long term.

The S share price is at it lowest compared to the C in years (although nothing beats the March 2020 plunge). I have been increasing my S purchases as we have seen this ratio plunge, but I am gaining more confidence in the ratio and would like to commit more heavily to basing my trades on this ratio.

Currently my thinking is that the S usually $9-10 higher than the C in share price (total history average is $6.7, recent average is much higher), it can climb as high as $26. Right now S is only higher than C by $5.05.

The attached graph is (S - C)/C to find the price difference ratio (it mirrors S/C but at smaller numbers). I want to work out triggers in this ratio to (1) go all in on S (maybe when the ratio cross 0.21), Sell S for C (maybe when the ratio crosses 0.3) and when to sell all and move to G (when the ratio crosses 0.385). These triggers would override my other trading strategy when they apply.

Thoughts, suggestions, and critiques are appreciated!
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Horaenaut
Posts: 102
Joined: Mon Apr 29, 2019 11:18 am

Re: Developing A New Strategy: SC Ratio

Post by Horaenaut »

Either way, it seems it's generally a good time to be holding S if you are not near retirement (20 years left for me) and as soon as the month rolls over I'll be moving in that direction.

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12squared
Posts: 675
Joined: Thu Dec 31, 2015 7:28 am

Re: Developing A New Strategy: SC Ratio

Post by 12squared »

Horaenaut wrote: Thu Apr 28, 2022 12:34 pm The attached graph is (S - C)/C to find the price difference ratio (it mirrors S/C but at smaller numbers). I want to work out triggers in this ratio to (1) go all in on S (maybe when the ratio cross 0.21), Sell S for C (maybe when the ratio crosses 0.3) and when to sell all and move to G (when the ratio crosses 0.385). These triggers would override my other trading strategy when they apply.
Horaenaut,
It appear that your plots came from Excel.
Consider that (S - C)/C is equivalent to S/C - 1.
You might find it less time consuming to plot S/C in Stock Charts or TradingView and just shift your ratios by +1
12²
“The genius of investing is recognizing the direction of the trend – not catching the highs or the lows.”
- Dean Witter

"Put all your eggs in one basket and then watch that basket."
- Andrew Carnegie

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Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

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