Feature selection can improve both predictive accuracy and intuition about regime-dependence of your trading strategy.

• Find out the most important factors affecting profitability.
• Rank these factors by importance scores.
• Use only factors with high scores to predict profitability.
• Improves out-of-sample predictive accuracy by building more parsimonious models. (See our recent blog post.)

Example: A short volatility strategy

• Use strategy returns as target variables (labels).
• Use VIX, 1-day SPY return, interest rate change, etc. as predictors (features).
• Feature selection may tell us: