The Strategy Factor Trap
Even “unique” strategies are often just disguised factors.

In the early days of quantitative trading, pairs trading (buying Pepsi, selling Coke) was alpha. It was novel. Few people did it. The returns were genuine outperformance.

Today, pairs trading is a commodity. Thousands of algorithms run mean-reversion strategies on correlated securities. The “easy edge” has been arbitraged away. What remains is a strategy factor: the mean reversion risk premium, which is harder to capture and more prone to crowding.