What happens if we apply KCOR to financial markets?

(For informational purposes only)

Over the past 6 months, I developed a novel statistical framework (KCOR) for analyzing large retrospective datasets. While the original application was in epidemiological research, I later discovered that the same mathematical structure could be applied to financial markets.

This post describes a quantitative, fully systematic equity strategy derived from that work and presents historical backtest results generated using publicly available U.S. equity data.

This discussion is educational and informational only. Nothing in this post constitutes investment advice, an offer to sell securities, or a solicitation to purchase securities.

The strategy has the following characteristics:

• Fully algorithmic; no discretionary judgment

• The algorithm is exactly the same over the entire period

• Long-only

• Trades only U.S. large-cap public equities

• No leverage

• Low turnover, designed for tax efficiency

• Two tunable parameters with broad parameter stability

• All gains are long term capital gains

The approach is based on persistent structural features of market data rather than short-term signals.

The results below reflect a hypothetical backtest covering the 25-year period from January 2000 through October 2025.

Key points:

• These results are not audited

• They reflect hypothetical performance

• They include assumptions that may not hold in live trading

• Past performance does not predict future results

The strategy experienced substantial drawdowns during major market dislocations (e.g., 2000–2002, 2008), and investors would have needed the ability to tolerate significant volatility and extended recovery periods.

Detailed tables of hypothetical returns, drawdowns, and trade statistics are provided below for transparency.

Generated: 2025-11-18 14:34:17
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CONFIGURATION PARAMETERS
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List Name:               sp500_and_ndx
Analysis Period:         2000-01-03 to 2025-10-07
Portfolio Size:          xx stocks per portfolio
Screening Lookback:      yy months
Rebalancing Period:      366 days (for tax efficiency)
Initial Investment:      $1,000 per stock
Algorithm:               Czech mortality
Strategy:                LONG
Parallel Portfolios:     26
Entry Offset:            14 day(s)
Total Investment:        $260,000

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PORTFOLIO PERFORMANCE SUMMARY
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Initial Portfolio Value: $260,000.00
Final Portfolio Value:   $145,633,323.92
Dividends Collected:     $2,753,689.09
Dividend Return:         1059.11%
Total Return:            49760.80%
Annualized Return (TWR): 28.69%
Net Annualized Return:   27.32%
Money-Weighted Return:   28.65%
Total Management Fees:   $7,847,224.33
Total Performance Fees:  $26,647,833.46
Annualized Volatility:   36.58%
Sharpe Ratio:            0.75
Maximum Drawdown:        -70.91%
Number of Trading Days:  6480

MONTHLY RETURNS STATISTICS:
Best Month:              41.03%
Worst Month:             -29.08%
Average Monthly Return:  2.45%
Monthly Volatility:      9.33%

ANNUAL RETURNS:
Year 2000: -29.15%
Year 2001: 11.45%
Year 2002: -5.73%
Year 2003: 87.07%
Year 2004: 70.50%
Year 2005: 56.14%
Year 2006: 25.63%
Year 2007: 72.36%
Year 2008: -59.74%
Year 2009: 47.71%
Year 2010: 40.72%
Year 2011: -1.06%
Year 2012: 46.33%
Year 2013: 54.34%
Year 2014: 25.08%
Year 2015: 5.73%
Year 2016: 19.26%
Year 2017: 29.48%
Year 2018: 9.21%
Year 2019: 36.48%
Year 2020: 124.35%
Year 2021: 22.44%
Year 2022: -2.75%
Year 2023: 25.81%
Year 2024: 120.31%
Year 2025: 47.40%

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PER-PORTFOLIO PERFORMANCE
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Ranked Portfolios (by annualized return):
 1. Portfolio 14: Ending Equity $16,686,008.96 | Annualized Return 34.32% | Mgmt Fees $970,623.52 | Perf Fees $3,657,218.94
 2. Portfolio 15: Ending Equity $15,798,603.58 | Annualized Return 34.09% | Mgmt Fees $862,538.76 | Perf Fees $3,509,460.04
 3. Portfolio 16: Ending Equity $13,932,361.21 | Annualized Return 33.48% | Mgmt Fees $695,019.59 | Perf Fees $2,767,427.21
 4. Portfolio 11: Ending Equity $12,396,939.61 | Annualized Return 32.58% | Mgmt Fees $714,062.55 | Perf Fees $2,186,955.89
 5. Portfolio 12: Ending Equity $10,763,076.08 | Annualized Return 31.89% | Mgmt Fees $596,153.43 | Perf Fees $1,950,354.07
 6. Portfolio 13: Ending Equity $10,333,640.36 | Annualized Return 31.74% | Mgmt Fees $618,502.03 | Perf Fees $2,050,079.31
 7. Portfolio 18: Ending Equity $7,883,281.44 | Annualized Return 30.60% | Mgmt Fees $422,537.31 | Perf Fees $1,729,078.65
 8. Portfolio 20: Ending Equity $6,870,259.33 | Annualized Return 29.99% | Mgmt Fees $218,377.07 | Perf Fees $598,574.95
 9. Portfolio 10: Ending Equity $6,371,236.77 | Annualized Return 29.09% | Mgmt Fees $373,014.75 | Perf Fees $1,027,489.12
10. Portfolio 17: Ending Equity $5,724,002.70 | Annualized Return 28.89% | Mgmt Fees $329,654.15 | Perf Fees $1,162,117.12
11. Portfolio 19: Ending Equity $5,442,591.59 | Annualized Return 28.73% | Mgmt Fees $289,113.01 | Perf Fees $1,222,257.08
12. Portfolio 21: Ending Equity $4,861,222.69 | Annualized Return 28.25% | Mgmt Fees $191,383.92 | Perf Fees $536,369.85
13. Portfolio 26: Ending Equity $4,538,988.39 | Annualized Return 28.15% | Mgmt Fees $194,748.67 | Perf Fees $604,779.97
14. Portfolio 22: Ending Equity $3,421,109.94 | Annualized Return 26.50% | Mgmt Fees $208,121.31 | Perf Fees $511,352.87
15. Portfolio 23: Ending Equity $3,060,476.78 | Annualized Return 25.99% | Mgmt Fees $189,271.21 | Perf Fees $471,834.16
16. Portfolio 25: Ending Equity $2,629,487.09 | Annualized Return 25.31% | Mgmt Fees $145,394.19 | Perf Fees $438,595.44
17. Portfolio 24: Ending Equity $2,454,320.67 | Annualized Return 24.92% | Mgmt Fees $135,356.52 | Perf Fees $410,138.89
18. Portfolio 9: Ending Equity $2,483,211.30 | Annualized Return 24.34% | Mgmt Fees $174,227.29 | Perf Fees $403,592.63
19. Portfolio 3: Ending Equity $2,088,427.23 | Annualized Return 23.26% | Mgmt Fees $111,372.88 | Perf Fees $352,847.50
20. Portfolio 8: Ending Equity $1,617,556.10 | Annualized Return 22.22% | Mgmt Fees $92,753.79 | Perf Fees $224,593.62
21. Portfolio 2: Ending Equity $1,369,575.85 | Annualized Return 21.22% | Mgmt Fees $65,908.46 | Perf Fees $215,398.37
22. Portfolio 1: Ending Equity $1,183,295.30 | Annualized Return 20.49% | Mgmt Fees $54,389.64 | Perf Fees $175,374.88
23. Portfolio 4: Ending Equity $1,093,105.23 | Annualized Return 20.22% | Mgmt Fees $52,335.17 | Perf Fees $128,906.01
24. Portfolio 7: Ending Equity $1,037,286.02 | Annualized Return 20.07% | Mgmt Fees $56,140.34 | Perf Fees $124,481.97
25. Portfolio 6: Ending Equity $801,809.41 | Annualized Return 18.83% | Mgmt Fees $45,325.17 | Perf Fees $94,218.16
26. Portfolio 5: Ending Equity $791,450.30 | Annualized Return 18.74% | Mgmt Fees $40,899.59 | Perf Fees $94,336.78
Average Annualized Return (across 26): 26.69%

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TRADE PERFORMANCE ANALYSIS
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Total Completed Trades:  6,052
Winning Trades:          4,232
Losing Trades:           1,817
Breakeven Trades:        3
Win Rate:                69.9%
Average Win Amount:      $34,460.23
Average Loss Amount:     $-7,815.37
Average Win Percentage:  111.0%
Average Loss Percentage: -28.4%
Largest Win:             $3,878,087.96
Largest Loss:            $-196,895.98
Profit Factor:           10.27
Avg Holding Period:      435 days
Avg Holding (Winners):   452 days
Avg Holding (Losers):    394 days
Risk-Reward Ratio:       4.41:1
Trade Expectancy:        $21746.82

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TAX IMPLICATIONS SUMMARY
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Total Realized Gains:    $131,635,176.49
Long-term Gains (≥1yr):  $131,635,176.49
Short-term Gains (<1yr): $0.00
Long-term Percentage:    100.0%
Note: Long-term gains typically taxed at lower rates (0%, 15%, or 20%)
      Short-term gains taxed as ordinary income
[INFO] Long positions opened: 5676
[INFO] Long positions closed: 6052
[INFO] Total open amount: $325,197,006.13
[INFO] Total close amount: $340,246,619.91
[INFO] Long-term sells: 6052 ($340,246,619.91)
[INFO] Short-term sells: 0 ($0.00)
[INFO] Average holding period: 435 days

For readers interested in an informal, AI-generated discussion of how results of this magnitude compare—at a high level—to commonly known long-only investment strategies, a separate commentary is available here.

This commentary is AI-generated, reflects no independent verification, and should not be interpreted as an endorsement, validation, or investment advice.

The strategy has been implemented in live trading beginning in late 2025. Over the initial operating period to date, the strategy has generated positive returns.

This live track record is short in duration and should not be interpreted as statistically conclusive, predictive, or as validation of the historical backtest.

All Live trading was conducted under the same rules as the historical backtest.

• This strategy is highly volatile

• Large drawdowns are possible

• There is no guarantee that historical relationships will persist

• Liquidity assumptions may fail under stressed market conditions

• The strategy may underperform the broader market for extended periods

This strategy is not suitable for most investors.

Kirsch Capital is exploring interest from investors who meet the SEC definitions of Accredited Investor, Qualified Client, or Qualified Purchaser, as applicable under U.S. securities laws. This generally means you have a net worth of $2.2M or more.

Any potential investment would be offered only pursuant to an applicable exemption from registration, including Rule 506(c) of Regulation D, and only after verification of investor status.

Submitting an information request does not constitute an offer or acceptance of any investment.

If you believe you may qualify and would like to receive additional information, you may submit an investment interest form. Access to further materials, if any, will be provided only after appropriate qualification and verification.

This post is intended to describe research, methodology, and hypothetical results. It should not be relied upon as the basis for any investment decision.

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