What Is the Regime Strategy — A Quant System That Adapts to the Market
Markets don't always wear the same face. The Regime Strategy measures each month whether the market is rising, ranging, or falling, and runs KOSPI large caps with a stance to match. Measurement, not prediction.
The system TheQuantKorea runs is called the Regime Strategy. This post explains what it is and how it works, written for a first-time reader.
What quant investing means
First, the term. Quant investing means selecting and trading stocks mechanically by fixed rules — not by gut feel or the day's headlines. The point is to remove room for emotion.
The market has three faces
The Regime Strategy adds one idea: the market is not always in the same state. It moves between three regimes.
- Uptrend — broadly rising
- Sideways — moving without clear direction
- Downtrend — broadly falling
Each month the strategy measures which of the three the market is in. It does not predict the future; it reads the present. Then it selects a small number of KOSPI large caps by a rule matched to that regime, and holds them at equal weight for one month.
- Uptrend → favor high-return (CAGR) names, aggressive (3 holdings)
- Sideways → favor strong risk-adjusted (Sharpe) names, balanced (7 holdings)
- Downtrend → favor low-drawdown (MDD), defensive names (5 holdings)
The criterion for picking stocks changes by regime, but once picked, the names are held in equal amounts. If three names are selected in an uptrend, each gets one-third of the capital. Not betting more on any single name comes from the same principle — we don't predict which one will rise more.
The core is "don't lose big"
The design prioritizes not losing big over winning big. So when the market surges, it may lag the index; when the market drops sharply, it is built to defend.
Over an 11-year backtest (2015–2026), this shows up in the numbers. Across the 34 months the market was in a downtrend, KOSPI fell about 75% cumulatively, while the Regime Strategy shifted to a defensive stance and stayed cumulatively positive. In exchange, it gives up some upside during sharp rallies. The give-up in rallies and the defense in declines are two sides of the same mechanism.
Run with real capital, reported monthly
TheQuantKorea runs this system with real capital and reports every month what it did and how it performed — gains and losses alike. This is not a place that sells forecasts; it shows the process in the open.
The 11-year backtest curve and per-regime performance are available on the track record page.
This post is for informational purposes and is not investment advice. All figures are backtest results on historical data and do not guarantee future returns.