Mean Reversion

Portfolio & Strategy

A statistical principle that extreme prices tend to move back toward historical averages or 'means' over time. For example, if a stock has declined 30% below its historical average, mean reversion suggests it is likely to recover. Mean reversion strategies profit from identifying overextended prices and positioning for normalization. However, mean reversion can fail dramatically during strong trending markets or structural regime changes.

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Asset AllocationBenchmarkDiversificationEfficient FrontierGamma Exposure (GEX)HedgeLong PositionMarket RegimesMomentumShort PositionTrend Following

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Mean Reversion | Blackworks Capital