Carlson's Orthogonal Alpha (BTAL/QLD)
Hold a 50% core: 25% QLD + 25% BTAL (equal weight). Compute BTAL's average momentum (mean of 1m, 3m, 6m, 12m returns) and BIL's. Backtest max drawdown: -27.5%.
Strategy & methodology
Hold a 50% core: 25% QLD + 25% BTAL (equal weight); Compute BTAL's average momentum (mean of 1m, 3m, 6m, 12m returns) and BIL's; If BTAL momentum > BIL momentum, put the 50% satellite in BTAL; otherwise in QLD; Rebalance monthly on the…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- Not recorded. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
- Full history, since 2003
- 16.1% a year, worst fall -27.5% (Jul 21, 2006, a simulated 2x)
- Since QLD launched (Jun 21, 2006)
- 17.6% a year, worst fall -26.4% (May 13, 2009)
Stand-in funds and until when (1)
- QLD: simulated 2x QQQ before Jun 21, 2006
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Hold a 50% core: 25% QLD + 25% BTAL (equal weight). Compute BTAL's average momentum (mean of 1m, 3m, 6m, 12m returns) and BIL's. Backtest max drawdown: -27.5%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version 4a7758a1, published 2026-10-01
Is Carlson's Orthogonal Alpha (BTAL/QLD) still working in 2026?
Carlson's Orthogonal Alpha (BTAL/QLD) returned 24.41% over the trailing 12 months and 100.01% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 16.06%. Its full-backtest maximum drawdown was -27.48%. The full sample contains 6008 daily NAV observations from 2003-02-28. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -1.41% below its high-water mark of 2026-06-02, 4 months ago, and its longest run below a previous high was 2.0 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 24.41% | Not annualized | -19.07% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 100.01% | Not annualized | -19.07% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 3253.07% | 16.06% | -27.48% | 6008 | 2003-02-28 to 2026-10-01 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-06-02, 4 months before 2026-10-01, and it is -1.41% below that level now. The longest run below a previous high in the full backtest was 2.0 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
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 2026-10-01 (23.6 years): 16.1% CAGR, 1.00 Sharpe, -27.5% max drawdown, 20.5% volatility.
- Type
- Tactical (TAA)
- Author
- Thomas Carlson
- Rebalancing
- Monthly
- Risk
- Aggressive
- Period
- 2003-02-28 to 2026-10-01
- CAGR
- 16.1%
- Sharpe
- 1.00
- Max Drawdown
- -27.5%
- Volatility
- 20.5%
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 2026-10-01, Carlson's Orthogonal Alpha (BTAL/QLD) returned 16.1% CAGR with a -27.5% maximum drawdown and a Sharpe ratio of 1.00. 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 2026-10-01)
| Metric | Carlson's Orthogonal Alpha (BTAL/QLD) |
|---|---|
| CAGR | 16.1% |
| Max Drawdown | -27.5% |
| Sharpe | 1.00 |
| Sortino | 1.84 |
| Volatility | 20.5% |
| Calmar | 0.58 |
| Total Return | 3253.1% |
| Backtest Period | 23.6 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
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.
Holding Carlson's Orthogonal Alpha (BTAL/QLD) alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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