Carlson's Orthogonal Alpha (BTAL/QLD) at a glance
Carlson's Orthogonal Alpha (BTAL/QLD) is a tactical asset allocation (TAA) strategy by Thomas Carlson across Leveraged US Equity, Market-Neutral / Anti-Beta, rebalanced monthly. Backtested 2003-02-28 to 2026-07-03 (23.3 years): 16.2% CAGR, 1.01 Sharpe, -28.2% max drawdown, 20.7% volatility.
- Type
- Tactical (TAA)
- Author
- Thomas Carlson
- Rebalancing
- Monthly
- Risk
- Aggressive
- Period
- 2003-02-28 to 2026-07-03
- CAGR
- 16.2%
- Sharpe
- 1.01
- Max Drawdown
- -28.2%
- Volatility
- 20.7%
Carlson's Orthogonal Alpha (BTAL/QLD) — Tactical Asset Allocation Strategy
Thomas Carlson's Orthogonal Alpha is a core-satellite model built around BTAL, the market-neutral anti-beta ETF (long low-beta, short high-beta equities). BTAL behaves largely independently of the broad market and tends to spike during equity stress, which makes it useful both as ballast and as a timing signal.
The core (50%) holds 2x Nasdaq-100 (QLD) and BTAL in equal weight: QLD supplies upside skew while BTAL supplies crisis convexity, so the pair is smoother than QLD alone. The satellite (50%) is a momentum switch that uses BTAL's own strength as the risk gauge: if BTAL's 1/3/6/12-month momentum beats T-bills it holds BTAL, otherwise QLD. Because anti-beta strength tends to lead equity drawdowns, the model de-risks before the damage.
Carlson's Orthogonal Alpha (BTAL/QLD): frequently asked questions
- What is Carlson's Orthogonal Alpha (BTAL/QLD)?
- Core-satellite of 2x Nasdaq (QLD) and market-neutral anti-beta (BTAL). Core holds both equal-weight; the satellite switches into BTAL when its own 1/3/6/12-month momentum beats T-bills, otherwise QLD. A higher-risk diversifier that uses anti-beta strength as an early risk-off signal.
- Who created the Carlson's Orthogonal Alpha (BTAL/QLD) strategy?
- Carlson's Orthogonal Alpha (BTAL/QLD) was developed by Thomas Carlson. It is based on Carlson, T. (2025). The Power of Orthogonal Alpha: BTAL as Both Hedge and Signal (LinkedIn).
- What is the historical return and maximum drawdown of Carlson's Orthogonal Alpha (BTAL/QLD)?
- Backtested from 2003-02-28 to 2026-07-03, Carlson's Orthogonal Alpha (BTAL/QLD) returned 16.2% CAGR with a -28.2% maximum drawdown and a Sharpe ratio of 1.01. Past performance does not guarantee future results.
- How often is Carlson's Orthogonal Alpha (BTAL/QLD) rebalanced?
- Carlson's Orthogonal Alpha (BTAL/QLD) is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Carlson's Orthogonal Alpha (BTAL/QLD) a tactical asset allocation strategy?
- Yes. Carlson's Orthogonal Alpha (BTAL/QLD) is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.
Backtest Performance (2003-02-28 to 2026-07-03)
| Metric | Carlson's Orthogonal Alpha (BTAL/QLD) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 16.2% |
| Maximum Drawdown | -28.2% |
| Sharpe Ratio | 1.01 |
| Sortino Ratio | 1.69 |
| Annualized Volatility | 20.7% |
| Calmar Ratio | 0.57 |
| Total Return | 3195.5% |
| Backtest Period | 23.3 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- aggressive
- Variants
- 1
- Author
- Thomas Carlson
- Source
- Carlson, T. (2025). The Power of Orthogonal Alpha: BTAL as Both Hedge and Signal (LinkedIn)
Asset Classes
- Leveraged US Equity
- Market-Neutral / Anti-Beta
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
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