CAGR, the compound annual growth rate, is the single yearly rate that would turn the starting value into the ending value if it were earned every year. It smooths a bumpy path into one number, which makes strategies with different test lengths comparable, and also hides how bumpy the path was. Read it next to max drawdown.
CAGR = (end value ÷ start value)^(1 ÷ years) − 1
Dynamic Factor Strength Strategy returned +417.8% in total over 9.9 years, so $10,000 became about $51,780. (5.178)^(1 ÷ 9.95) − 1 = +18.0% a year, which is the CAGR its backtest reports.
Across 6 re-run strategies CAGR has a median of 18.1%. The list below keeps only strategies whose max drawdown stayed within 25%, highest CAGR first, because a high rate that came with a deep fall is a different risk.
Each dot is one strategy: further left is a shallower worst fall, higher up is a higher annual rate. The upper-left corner is where return came with the least drawdown.
Low-drawdown strategies — full table
CAGR = (end value ÷ start value)^(1 ÷ years) − 1
Dynamic Factor Strength Strategy returned +417.8% in total over 9.9 years, so $10,000 became about $51,780. (5.178)^(1 ÷ 9.95) − 1 = +18.0% a year, which is the CAGR its backtest reports.
Across 6 re-run strategies CAGR has a median of 18.1%. The list below keeps only strategies whose max drawdown stayed within 25%, highest CAGR first, because a high rate that came with a deep fall is a different risk.
All strategy backtests, lowest drawdown first
Disclosure. Backtests are hypothetical simulations on historical data. They do not include every real-world cost, are not live results, and do not guarantee future returns. Educational research only, not investment advice.