Low Volatility Stocks Strategy (Python)

This defensive equity factor seeks out the "low volatility anomaly"—the observation that stocks with calmer price movements often deliver superior risk-adjusted returns. Volatility is calculated as the standard deviation of daily returns over a trailing window (60 trading days by default). On the first trading day of each month the universe is ranked by realized volatility. The strategy goes long the lowest-volatility decile and shorts the highest-volatility decile, allocating equal dollar weights within each bucket. Positions are held until the next monthly rebalance and no explicit stop-losses are used. Backtests show a smoother equity curve and smaller drawdowns than the broad market, making the approach attractive for investors seeking equity exposure with reduced risk.

• Entry Criteria: Monthly sort by trailing volatility; long lowest decile, short highest decile

• Long/Short: Both

• Exit Criteria: Next monthly rebalance

• Stops: No

• Default Values:

• VolWindowDays = 60

• Deciles = 10

• MinTradeUsd = 200

• CandleType = TimeSpan.FromDays(1) [*]Filters:

• Category: Volatility

• Direction: Both

• Indicators: Standard deviation

• Stops: No

• Complexity: Intermediate

• Timeframe: Medium-term

• Seasonality: No

• Neural networks: No

• Divergence: No

• Risk level: Low