An offense-defense matrix for regime-aware stock selection

Two scores from one benchmark split

A two-axis offense-defense score is built by splitting a chosen benchmark into rising periods and flat-to-falling periods, then comparing a target's cumulative return in each subset to the matching benchmark subset.

An offensive score above 100 means the target outpaced the benchmark during rising periods. A defensive score below 100 means the target lost less than the benchmark during declining periods.

Four quadrants on the map

Plotting offense on the vertical axis and defense on the horizontal axis places a target in one of four quadrants. A reading near 95 offense and 105 defense marks underperformance on both sides of the regime split.

Paths and the benchmark equivalence line

Linking successive offense-defense points shows whether relative strength is improving, static, or deteriorating versus the benchmark on both axes at once.

The benchmark equivalence line (BEL) is the set of offense-defense pairs whose combined result matches the benchmark. Locations above the line beat that combined result and locations below it lag it.

How the ranking behaved in two samples

In a 1982-96 test, a northwest-quadrant stock portfolio compounded at 25.9% annualized versus 15.7% for the average stock and 6.3% for the southeast quadrant.

The same ranking applied to 1963-82 data, a span that included three major bear markets and the same 97 stocks, still put northwest-quadrant names first at 15.3% annualized versus 9.8% for the average and 7.7% for the southeast quadrant.

Stocks above the BEL outpaced those below it in the 1982-96 sample, at 19.5% versus 11.7% annualized, so the combined offense-defense filter ranked names even when they were not in the extreme quadrants.

Editorial reading of rotation, hedging, and bounds

Editorial: TradersWeek would next use the map with three bounded tools rather than as a standalone forecast. Rank rotation can turn quadrant location, BEL side, and the path of successive points into one testable entry, exit, and abstention procedure. Beta hedging can put a single holding into a diversified or regime-aware context when its rising-market job and its falling-market job disagree. A Risk-reward ratio can still keep a loss or exposure decision bounded before a trade is placed.