Strategy reference

The Low-Vol Sleeve (quarterly + hysteresis) — Canonical Reference

Lifecycle: PERMANENT. A canonical strategy reference in the the strategies folder layer — one

authoritative page per strategy, never archived while the strategy exists. It does not retire; it

is UPDATED, and its §Maintenance says what must be kept in sync. Machine-held by

an automated test, which fails the build if this page stops being served or

stops being listed in the index.

## 🟢 STATUS — THE ONE CONSTRUCT IN THIS ESTATE THAT CLEARS THE FUNDABLE BAR

Status: FUNDABLE ON THE RECORDED EVIDENCE — awaiting its forward test. This page states a

*positive* fundability verdict, which is rare here and therefore held to the same evidence bar as

every refusal: net of a realistic participation-cost model it clears the Nifty 500 buy-&-hold

hurdle (return/vol 0.89) at every AUM tested up to ₹500cr, and its drawdown stays flat at

~−21% against the index's −30%. Fundable is not the same as live. There is no book, no live

roster, and no capital: the ledger's own verdict ends *"Descriptive; NEXT = a forward/paper test

(freeze the spec, watch quarterly) before any capital."* Nothing here is investment advice.

Governing record: the strategy ledger Study 2026-07-22 (and its

predecessor 2026-07-22). Seal , pre-registered 2026-07-23.

Origin: 📚 CLASSIC (the low-volatility anomaly — Haugen-Baker / Ang-Hodrick-Xing-Zhang school)

+ 🏠 HOUSE (the quarterly + hysteresis refinement, which is the part that bought the capacity, and

the Almgren-based capacity fence that proved it). See the origins notes.

Charter: the single canonical definition + current-state reference. Result tables live in the

ledger; this page states the RULESET and the capacity finding and links the rest.

## 🔴 EVERY RATIO ON THIS PAGE IS A RETURN/VOL RATIO, NOT A SHARPE

The 1.06, the 0.89 hurdle and every capacity figure below are computed as mean/sd × √periods

with no risk-free rate subtracted. Read as a textbook Sharpe they read high. **But the index

hurdle is computed on the IDENTICAL basis**, so every relative claim here — including the

fundability verdict, which is entirely a claim about clearing that hurdle — holds exactly as

written. the desk ruling : relabel the vocabulary, change no numbers.

One-line definition: a long-only, equal-weight book of the calmest liquid Indian stocks — enter the bottom-20% by trailing volatility, *hold* a name until it leaves the wider bottom-40% band, re-select quarterly — whose low turnover is the entire reason it survives realistic trading costs at institutional size.

Where this stands — fundable on the recorded evidence, and NOT live. This is the one book in this estate

that still clears the index's return-per-unit-of-risk after realistic trading costs at institutional

size, and its worst fall stays around −21% where the index falls −30%. **That is not the same as

running it.** There is no live book, no published holdings and no money in it: the evidence is a

back-test with an honest cost model, and the next step on the record is a forward test that watches

it quarterly before any capital. Nothing here is investment advice.

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1. What it is — and what it is NOT

It is the estate's answer to a question every other strategy here has failed: *is there anything we

could actually fund?* The standing doctrine is that price strength is the only gross forward-return

engine and no factor here is a fundable net-of-cost alpha vs the index. This is the single

recorded exception, and it does not work by finding a stronger signal. It works by not trading.

It is NOT an EMA crossover result. 🔴 This matters because the module that forward-tests it,

the ema crossover forward code, is a crossover harness — the sleeve rides along as the **excluded

non-crossover COMPARATOR** (the role field in that runner) and is judged *for reference*, never as

a crossover finding . Labelling it one would attribute a real result to a falsified family.

It is NOT STEADY-25. See §7 — that confusion is the single most likely misreading of this page.

It is NOT live. No roster is published, no capital is allocated, and its forward window has not

been judged.

2. Our variation vs. the standard technique

The low-volatility anomaly is textbook: the calmest stocks have historically delivered

index-like returns with materially less drawdown, which is exactly the shape a defensive allocation

wants. Two things here are ours, and only one of them is a signal change.

(a) Hysteresis — a hold band wider than the entry band. The textbook form re-selects the bottom

quintile every period, so a name oscillating around the cut-off is bought and sold repeatedly for no

reason other than measurement noise. Here a name is BOUGHT at bottom-20% and HELD until it leaves

bottom-40%. (b) Quarterly, not monthly, re-selection.

Together those cut turnover from 199%/yr to 71%/yr — a 2.8× reduction — and that single change

is the whole result. It costs a little frictionless edge (the wider band dilutes the signal: 1.18 →

1.07 R/V before costs) and buys roughly 5× the capacity, while flattening the drawdown profile

across every AUM tested.

3. How it works — the ruleset (definitional)

Universe. Liquid NSE names on the shared PIT machinery — bhavcopy EQ+BE+BZ, corporate-action

adjusted, split-ratio quarantine, no survivorship bias.

Signal. Trailing realised daily volatility per name (sigma_daily), ranked cross-sectionally.

Entry. The bottom 20% of that volatility ranking.

Hold (the hysteresis). A held name is retained until it leaves the bottom 40% band, then

dropped at the next re-selection.

Cadence. Quarterly re-selection.

Weighting. Equal-weight across holdings.

Costs. Standalone numbers are net of a flat 0.15%/side on realised quarterly turnover; the

capacity table is re-cut with a participation-cost model (cost_participation.side_costs, Almgren

form) at each AUM.

Benchmark. Nifty 500 buy-&-hold, return/vol 0.89, on the identical no-rf basis.

4. Status, validation & the fundability verdict

Standalone, net of flat cost: return/vol 1.06 · CAGR 15.0% · MaxDD −20.8%.

Walk-forward, both halves balanced: h1 1.05 / 13.2% / −15.4 · h2 1.08 / 16.6% / −20.8.

Correlation to the momentum stack: 0.003 — this is a genuinely independent return stream, not

momentum wearing a different label.

The capacity fence is the finding. Net return/vol · CAGR · MaxDD, by assets under management,

against the index's 0.85 / 13.4% / −30%:

Median held ADV ₹50.8cr; soft-capacity estimate ₹622cr. **The drawdown does not degrade with

size** — it sits at ~−21% at every AUM, where the monthly predecessor bled to −30%. That stability,

not the return, is the reason this is the defensible product: it beats the index on return to about

₹250cr and beats it on *drawdown* everywhere.

The blend is NOT the product. A 40/60 momentum/low-vol mix scores a higher ratio (1.25) but

drags the drawdown to −34.1% and cannot scale — momentum's ₹4.6cr median ADV binds the whole

blend to small AUM. Recorded, and rejected as the fundable form.

What "fundable" does and does not mean here. It means: on the recorded evidence, net of a

realistic cost model, this clears the index hurdle at sizes that matter. It does not mean

deployed, and it does not retire the standing doctrine — the ledger's fundability corollary is

narrowed by this result, not overturned. The honest sentence is the one the X-Factor review settled

on: *no scalable book survives capacity-aware costs; one low-turnover corner does, with a stated

ceiling.* Publishing the size at which a strategy stops working is the differentiator.

5. Where it lives (code · routes · DB · timers)

• Module: the lowvol sleeve q research code (--build writes lowvolq_book +

lowvolq_holdings to the research database; --fence runs the capacity/cost recut).

Monthly predecessor: the lowvol sleeve code (seal , Study 2026-07-22).

• Routes: this reference page, and a row in the Strategy library. 🔴 **Deliberately no board and

no published roster** — see §9.

• Forward test: the ema crossover forward code carries it as the reference comparator; that runner is

box-armed and fires quarterly from ~2026-10-03.

6. Data & provenance

Runs entirely on primary-source data already ingested nightly: NSE bhavcopy OHLCV (EQ+BE+BZ),

corporate-action adjustments, per-symbol traded value for the liquidity and capacity work, and

Nifty 500 closes for the benchmark. No vendor dependency (Guardrail #8). Volatility is computed

from the adjusted price series, so it inherits the same PIT fences as every other book here.

7. Terminology canon

Sibling pages: the momentum riskadj notes (STEADY-25 / LOWVOL_MOM live there) ·

the union notes and the union ladder notes (the momentum family, whose variants are

*not* fundable and say so).

8. Decision & session history

• Study 2026-07-22 — the monthly low-vol sleeve . Frictionless edge better, but its

own capacity fence exposed 199%/yr turnover as the cost driver; ceiling ~₹50–100cr.

• Study 2026-07-22 — the quarterly + hysteresis v2 (registered 2026-07-23). The

turnover cut bought ~5× capacity and flat drawdown. The fundable verdict.

• **** — every ratio relabelled return/vol; no number moved.
• **** — category discipline: low-vol is the excluded comparator, never a crossover result.
• X-Factor review 2026-08-05 — corrected the over-broad claim that nothing beats buy-and-hold,

and found the registry defect recorded in §9.

• / 2026-08-27 — this page created; the sleeve given its first website presence.

9. Open items

1. 🔴 The forward/paper test is the gate, and it has not been judged. The ledger's own NEXT is

*freeze the spec, watch quarterly, before any capital*. The runner fires from ~2026-10-03. Until

it reports, this is a fundability verdict on in-sample-with-honest-costs evidence.

2. 🔴 The estate's own testing surface under-reports this result. research.db.strategy_runs —

the table /dash/testing renders — holds one participation-cost row, the C-BLEND *failure* at

0.17, and zero rows for the low-vol result that *passes* (X-Factor review C-3). The honesty

machine is mis-calibrated in the self-deprecating direction, which is as much a data defect as

the optimistic kind and considerably harder to notice.

3. No roster is published. lowvolq_holdings exists only in the research database, which the web

application does not read. Publishing a live roster is a SURFACE-PLAYBOOK landing in its own

right — and one that should follow the forward verdict, not precede it, because a published

holdings list of a *fundable-looking* book is the single most actionable-looking artefact this

estate could put on a screen.

4. The forward runner's timer is UNCAPTURED in the repo — box-armed as hermes-ema-forward.timer

while only patearn-ema-forward.service is captured under the vps live folder.

10. Sources of truth

Ledger Studies 2026-07-22 / 2026-07-22 (the strategy ledger) · seals

/ · the module named in §5 · the relabel and category ruling in