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Macro / Volatility-Regime Overlay

A regime-aware overlay: scale exposure up when a volatility regime is calm, down when it isn't. The headline metric isn't headline alpha — it's a smoother equity curve.

0.64

Sharpe (base)

0.67

Sharpe (regime overlay)

−58% → −42%

Max DD (base → overlay)

Status

open-source

Repo

GitHub ↗

The hypothesis

Some strategies are the same alpha across regimes; others are not. Scaling exposure by an external regime indicator — a smoothed VIX percentile — is a textbook risk-management overlay.

What the project does

Base strategy: long-only crypto basket rebalanced weekly.
Regime indicator: smoothed VIX percentile rank (10-day EMA of percentile).
Overlay: scale exposure inversely to the regime indicator.
Compare Sharpe / max DD with and without the overlay.

The result

Risk overlay: Sharpe barely moves, drawdown halves

Same basket, two position-sizing rules. Sharpe: 0.64 → 0.67 (+5%). Max DD: −58% → −42% (−28%). The headline metric looks flat; the equity-curve shape changes materially. This is what risk-managed return looks like in the data.

The headline Sharpe barely moves. The equity curve shape changes materially: 16 percentage points of drawdown absorbed by a regime-aware size scaler.

What’s transferable

Risk overlays don’t show up in headline alpha. They show up in the worst-year column of a fund’s tear sheet. This is the discipline of risk-managed return, not raw return.

The hypothesis

What the project does

The result

What’s transferable

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