I am looking to get a better understanding of the steps one would undertake to perform a proper backtest or statistical validation/testing of the below theory.
What in your opinion would those steps be or what kind of proof would be sufficient to either validate or deny the claim.
Theory/Claim: Xover decompresses vs Main (the iTraxx CDS indexes) on a proportional basis when the market sells off.
As of now I have going around the idea of somehow defining what a market sell off is and then performing a hypothesis testing on the time series I have which is index spreads since 2005. Would that be a suitable approach or is there a more appropriate techniques?