Alpha Report
Russell 2000
Composite Signal
2022–2026

1. Executive Summary

Signal Coverage: Russell 2000

Russell 2000 Macro Review:

• 2022: Russell 2000 futures fell about 22%, from an early-January high to a June low, as rate hikes raised funding costs for smaller, more leveraged companies. A Q4 bounce left the index well below its highs.
• 2023: About +17%, but unevenly: small caps lagged badly through the March regional-bank stress and hit the year's low on 27 October, before a sharp Q4 rally (+17%) as yields fell on expected rate cuts.
• 2024: About +11%, with small caps rallying when the Fed began cutting (Q3 +9%) and again after the November election, peaking on 25 November. Over the year they still lagged the large-cap indices.
• 2025: About +11%. The tariff shock drove a −10% first quarter and a low on 8 April; Fed cuts from September helped small caps recover to a December high.
• 2026 (to 28 Sep): About +13%: flat in Q1, a strong Q2 (+20%) as the rally broadened to small caps after the 30 March low, then −7% in Q3 from an August high as yields and oil rose again.

Signal Performance Overview:

• 2022: +8.5% (Sharpe 1.10) in a −22% market, mostly from longs (+7.0%) with shorts adding +3.5%, at a 55% hit rate and a −5.0% drawdown.
• 2023: +3.5% (Sharpe 0.72) with a −3.3% drawdown, gains roughly evenly split between longs and shorts in a choppy year.
• 2024: Close to flat at +0.6% (Sharpe 0.11): shorts made +5.1% while longs lost 2.6% in a rising market, a sign that it leaned against the trend.
• 2025: +12.1% (Sharpe 1.49), its strongest return of the walk-forward, mainly from longs (+10.4%) that captured the recovery after the April low, at a 58% hit rate.
• 2026 (F1, to 28 Sep): +8.1% (Sharpe 2.32), its best risk-adjusted year, with a 60% hit rate and only a −2.0% drawdown; it stayed positive through the Q3 decline.

2. Trading Strategy

In order to produce the metrics below we use the signal in combination with the trading strategy below:

• Entry positions: every 5 minutes between 09:45 and 15:25 ET (69 possible openings per day) we take a long, short or no position. Each position is split into 5 parts, executed on each minute of the 5 minutes after the decision. No sizing adjustment.
• Exit positions: each decision's position is closed between 15:55 and 16:00 ET, its five parts over the five minutes.
• Costs: 1.00 bp per side, 2.0 bp round trip (RTY). Extra exchange/clearing fees not included.
• Contract series & roll: Front month quarterly contract (Mar, Jun, Sep, Dec). Switch at the open 5 trading days before expiration (the third Friday of the contract month): stop trading the expiring contract and start trading the next.3. Model Training Data and Timeframe

3. Model Training Data and Timeframe

Each year of Section 4 is scored by the committee of its own walk-forward fold, trained and validated only on data before that year:

4. Performance Metrics: walk-forward, 2022 – 2026

4.1 Return and Risk Metrics

Quarterly and annual return, risk-adjusted performance and drawdown for the trading strategy defined in Section 2. Sharpe is per session on fixed capital. 2026 runs to 2026-09-28.

Table 1: Quarterly and Annual Metrics

Figure 1: Cumulative equity from $1,000,000, quarterly returns compounded from 22Q1 (out-of-sample)

The curve compounds the quarterly returns from $1,000,000 for illustration. The strategy metrics in this report assume fixed capital, so the ending value is not the sum of the quarterly returns.

4.2 Participation, Recall and Effective Leverage

Quarterly and annual view of how often the signal trades, how many of the realised moves it captures, and how much of the notional capital is deployed on average.

Table 2: Quarterly and Annual Participation, Recall and Effective Leverage

5. Next Steps

Download historical predictions using the Client API and confirm performance in your own test harness:

• Sign-up: Create account
• API Documentation: https://quantumsignals.ai/documentation

6. Contact

Please reach out with any questions or comments at: info[at]quantumsignals.ai