Invest Without Emotions
A lot of thick blue squares mean that positive correlations are high. Red squares mean negative correlations are high. Whites are the doldrums.
We are not big fans of using the Price-to-Earnings ratio. We saw how funds that use the market PE to time the market are no better than a buy-and-hold strategy (sometimes B&H performs better,) and we followed that up with how every single “ratio” has a caveat. And PE is the dumbest of them all.
However, if a large group of market participants pay attention to single flawed metric, then there should be a profitable arbitrage strategy that exploits that anomaly?
Researchers in the US figured out a way to do just that.
We haven’t tested this for the Indian market yet. But this is just too cool not to share!
Paper: Rankings of published price-earnings ratios and investor attention
| MINTs | |
|---|---|
| JCI(IDN) | -0.27% |
| INMEX(MEX) | -2.26% |
| NGSEINDX(NGA) | +0.14% |
| XU030(TUR) | -4.70% |
| BRICS | |
|---|---|
| IBOV(BRA) | -6.06% |
| SHCOMP(CHN) | +2.87% |
| NIFTY(IND) | -1.03% |
| INDEXCF(RUS) | -3.30% |
| TOP40(ZAF) | -2.54% |
| Energy | |
|---|---|
| Ethanol | -4.06% |
| RBOB Gasoline | -4.46% |
| Brent Crude Oil | -4.02% |
| Heating Oil | -1.74% |
| WTI Crude Oil | -5.35% |
| Natural Gas | -2.77% |
| Metals | |
|---|---|
| Gold 100oz | -3.05% |
| Palladium | +1.49% |
| Platinum | -1.18% |
| Silver 5000oz | -1.35% |
| Copper | -4.80% |
| MINTs | |
|---|---|
| USDIDR(IDN) | +0.70% |
| USDMXN(MEX) | +2.26% |
| USDNGN(NGA) | -0.03% |
| USDTRY(TUR) | +3.28% |
| BRICS | |
|---|---|
| USDBRL(BRA) | +4.95% |
| USDCNY(CHN) | +0.00% |
| USDINR(IND) | +0.90% |
| USDRUB(RUS) | +2.83% |
| USDZAR(ZAF) | +2.53% |
| Agricultural | |
|---|---|
| Coffee (Arabica) | -4.47% |
| Coffee (Robusta) | -0.56% |
| Corn | -6.67% |
| Cotton | +0.03% |
| Wheat | -7.62% |
| White Sugar | -3.08% |
| Orange Juice | +2.83% |
| Feeder Cattle | -2.46% |
| Cattle | -2.62% |
| Cocoa | -3.88% |
| Lean Hogs | +2.41% |
| Lumber | -4.10% |
| Soybean Meal | -1.83% |
| Soybeans | -2.34% |
| Sugar #11 | -5.94% |
| Index | Change |
|---|---|
| Markit CDX EM | -0.39% |
| Markit CDX NA HY | -0.72% |
| Markit CDX NA IG | +3.51% |
| Markit iTraxx Asia ex-Japan IG | -0.56% |
| Markit iTraxx Australia | -2.39% |
| Markit iTraxx Europe | -0.14% |
| Markit iTraxx Europe Crossover | +7.87% |
| Markit iTraxx Japan | -1.57% |
| Markit iTraxx SovX Western Europe | +1.59% |
| Markit LCDX (Loan CDS) | +0.00% |
| Markit MCDX (Municipal CDS) | +0.01% |
For a deeper dive into indices, check out our weekly Index Update.
| Decile | Mkt. Cap. | Adv/Decl |
|---|---|---|
| 1 (micro) | -1.58% | 73/62 |
| 2 | +0.74% | 69/66 |
| 3 | +8.28% | 69/66 |
| 4 | -0.03% | 71/63 |
| 5 | +1.95% | 70/66 |
| 6 | +0.73% | 65/70 |
| 7 | +0.40% | 72/63 |
| 8 | +1.34% | 70/65 |
| 9 | -0.35% | 63/72 |
| 10 (mega) | +0.01% | 70/65 |
| INFY | +8.56% |
| ABIRLANUVO | +8.56% |
| IBULHSGFIN | +8.86% |
| LUPIN | -15.25% |
| SUNPHARMA | -11.76% |
| CONCOR | -11.74% |
| INFRABEES | +1.50% |
| JUNIORBEES | -0.66% |
| NIFTYBEES | -1.12% |
| CPSEETF | -2.56% |
| PSUBNKBEES | -2.76% |
| BANKBEES | -2.94% |
| GOLDBEES | -3.13% |
| Sub Index | Change in YTM | Total Return(%) |
|---|---|---|
| 0 5 | +0.02 | +0.12% |
| 5 10 | -0.04 | +0.35% |
| 10 15 | -0.01 | +0.22% |
| 15 20 | -0.02 | +0.34% |
| 20 30 | -0.02 | +0.36% |
| Quality to Price | +3.77% |
| Magic Formula | +1.09% |
| Financial Strength Value | +0.58% |
| Balance Sheet Strength | -0.21% |
| Momentum | -0.34% |
| Tactical CNX 100 | -0.89% |
| High Beta | -1.31% |
| Next Trillion | -1.68% |
| ASK Life | -1.68% |
| CNX 100 Enterprise Yield | -1.76% |
| PPFAS Long Term Value | -1.91% |
| ADAG stocks | -1.97% |
| Low Volatility | -3.38% |
| The RBI Restricted List | -5.15% |
Big money is in buying and holding great businesses acquired at reasonable valuations. Owning such businesses will produce gut-wrenching roller coaster rides which the investor has to have the willingness to take. They can’t avoid those rides by jumping out and trying to get back in, and attempts to do so are likely to be unsuccessful. So, the best strategy is to stay put and bear it.
Source: Sanjay Bakshi
We run our proprietary momentum scoring algorithm on indices just like we do on stocks. You can use the momentum scores of sub-indices to get a sense for which sectors have the wind on their backs and those that are facing headwinds.
Traders can pick their longs in sectors with high short-term momentum and their shorts in sectors with low momentum. Investors can use the longer lookback scores to position themselves using our re-factored index Themes.
You can see how the momentum algorithm has performed on individual stocks here.
Here are the best and the worst sub-indices:
50-day performance, from May 18, 2015 through July 24, 2015:
| Index | Signal | % From Peak | Day of Peak |
|---|---|---|---|
| CNX AUTO | LONG |
6.90
|
2015-Jan-27
|
| CNX BANK | SHORT |
9.34
|
2015-Jan-27
|
| CNX COMMODITIES | SHORT |
27.83
|
2008-Jan-04
|
| CNX CONSUMPTION | LONG |
0.49
|
2015-Jul-22
|
| CNX ENERGY | LONG |
25.60
|
2008-Jan-14
|
| CNX FMCG | SHORT |
8.93
|
2015-Feb-25
|
| CNX INFRA | SHORT |
46.63
|
2008-Jan-09
|
| CNX IT | LONG |
88.00
|
2000-Feb-21
|
| CNX MEDIA | LONG |
19.72
|
2008-Jan-04
|
| CNX METAL | SHORT |
60.84
|
2008-Jan-04
|
| CNX MNC | SHORT |
0.95
|
2015-Jul-16
|
| CNX NIFTY | LONG |
5.28
|
2015-Mar-03
|
| CNX PHARMA | LONG |
11.60
|
2015-Apr-08
|
| CNX PSE | LONG |
23.77
|
2008-Jan-04
|
| CNX PSU BANK | SHORT |
39.09
|
2010-Nov-05
|
| CNX REALTY | LONG |
90.87
|
2008-Jan-14
|
| CNX SERVICE | LONG |
6.07
|
2015-Mar-03
|
A lot of thick blue squares mean that positive correlations are high. Red squares mean negative correlations are high. Whites are the doldrums.