Trading Futures Using Basis Indicator

Paper linkhttps://www.researchgate.net/publication/324670834_Predicting_Out-of-Sample_Returns_Using_Basis_to_Beat_the_Historical_Average

This strategy trades 65 global futures across commodities, equity indices, bonds, and FX. It predicts returns using the basis (difference between spot and futures prices) and its historical patterns. Positions are taken long if predicted returns are above the mean and short if below, with monthly rebalancing.

The strategy leverages the predictive power of the basis for future returns. Pooling information across markets enhances accuracy, and while restricted regression improves precision, simple historical averaging (naive predictors) often yields nearly as strong and more practical forecasts.