Summary

Through 3rd Quarter 2022 (data through 09-30-2022), the Correction Protection Model (CPM) is -8.3% year-to-date versus -24.8 for the S&P 500 (SPX), resulting in +16.5% of relative outperformance by CPM.  Bigger picture, since 2011 CPM has underperformed SPX by 1.7% per year but with 56% less risk according to Beta, 5% less risk according to Standard Deviation, and a 56% smaller Maximum Drawdown during that period.  CPM was created for more risk-averse investors to participate more comfortably in the US stock market with significantly less risk.

About CPM

In 2013 we introduced our Correction Protection Model (CPM) to Asbury Research subscribers.  CPM was created to satisfy client requests for a completely data-driven and repeatable methodology that objectively determines if investors should be adding or subtracting risk from portfolios.  

CPM was designed to be a defensive model that:

  • protects investor assets during market declines,
  • eliminates large drawdowns,
  • reduces volatility and risk by moving assets out of the market during adverse conditions, and
  • also takes advantage of the market’s historical upward bias.

More About CPM:

  • The signals are binary: the model is either Risk On (in the market) or Risk Off (out of the market).
  • There are no short positions and no hedging strategies.
  • Historically, CPM averages around 5 round-turn signals per year

The significance and strength of CPM is its ability to reduce the systematic risk of investing in the stock market.  This can be seen in the model’s low beta, significantly lower drawdowns, and lower standard deviation (risk) when trading the S&P 500.  But, in financial markets, less risk almost always means less reward so, while significantly reducing risk, CPM also tamps down performance.  The model was built for investors that are willing to sacrifice some performance for significantly less risk.

The tables and chart below display quantitative performance data and hypothetical returns from 2011 through the 3rd Quarter of 2022, when applying the CPM signals to the SPDR S&P 500 ETF Trust (SPY, which tracks the S&P 500).

Tables & Charts

On average, since 2011, The Correction Protection has underperformed the S&P 500 by 1.7% per year.

Also, since 2011, the Correction Protection Model has participated in the S&P 500 with 56% less risk according to Beta, 5% less risk according to Standard Deviation, and a 56% smaller Maximum Drawdown during that period.

Click the tables or chart to make them larger

Daily side-by-side performance chart since 2011 of the S&P 500 versus the S&P 500 utilizing Correction Protection Model Risk On/Risk Off signals.

We suggest that subscribers consider all of our research, not just this model or any single indicator or metric, when making decisions that affect their portfolio.

Click Here for more information about CPM

Disclosure: All investment models have inherent limitations in that they look back over previous data but can’t see into the future.  Hypothetical past performance does not guarantee future results.  Attempting to avoid a market decline by moving to cash comes with the inherent risk of potentially missing out on upside performance.  However, we believe our model’s hypothetical performance data is a testament to intelligent quantitative risk management, showing that a conservative, systematic, and repeatable process of active management can, over time, significantly outperform passive buy and hold investing.  Asbury Research’s models and investment research are used to inform our subscribers and clients but do not imply an actual investment portfolio.

Disclaimer: The information above is provided for information purposes only and is not intended to be a solicitation to buy or sell securities. Past performance as indicated from historical back-testing may not be typical of future performance. No inferences may be made and no guarantees of profitability are being stated by Asbury Research LLC.  The risk of loss trading in financial assets can be substantial, and different types of investment vehicles, including ETFs, involve varying degrees of risk.  Therefore, you should carefully consider whether such trading is suitable for you in light of your financial condition.