StockViz – Page 109 – Invest Without Emotions

Index Update 27.06.2015

stockviz June 27, 2015June 27, 2015

MOMENTUM

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:

Relative Strength Spread

Refactored Index Performance

50-day performance, from April 17, 2015 through June 26, 2015:

Equally Weighted		Market Cap. Weighted
CNX PHARMA (EQUAL)	+13.06%	CNX MNC (CAP)	+2.67%
CNX MNC (EQUAL)	+6.58%	CNX MEDIA (CAP)	+1.11%
CPSE INDEX (EQUAL)	+0.66%	CNX BANK (CAP)	+0.14%
CNX MEDIA (EQUAL)	-0.63%	CNX PHARMA (CAP)	+0.13%
CNX CONSUMPTION (EQUAL)	-1.62%	CNX ENERGY (CAP)	+0.08%
CNX FMCG (EQUAL)	-2.02%	NV20 (CAP)	-0.47%
NV20 (EQUAL)	-2.08%	CNX FINANCE (CAP)	-0.49%
CNX AUTO (EQUAL)	-2.14%	CPSE INDEX (CAP)	-0.94%
CNX PSE (EQUAL)	-2.89%	CNX AUTO (CAP)	-1.64%
NSE QUALITY 30 (EQUAL)	-2.92%	CNX COMMODITIES (CAP)	-1.76%
NI15 (EQUAL)	-3.08%	CNX SERVICE (CAP)	-2.14%
CNX FINANCE (EQUAL)	-3.19%	CNX CONSUMPTION (CAP)	-2.22%
CNX IT (EQUAL)	-3.98%	CNX PSE (CAP)	-2.24%
CNX ENERGY (EQUAL)	-4.86%	CNX INFRA (CAP)	-2.65%
CNX COMMODITIES (EQUAL)	-5.50%	CNX IT (CAP)	-3.71%
CNX BANK (EQUAL)	-5.56%	NI15 (CAP)	-4.59%
CNX SERVICE (EQUAL)	-5.74%	NSE QUALITY 30 (CAP)	-4.97%
CNX INFRA (EQUAL)	-7.64%	CNX FMCG (CAP)	-7.42%
LIX 15 (EQUAL)	-9.59%	LIX 15 (CAP)	-7.72%
CNX METAL (EQUAL)	-14.72%	CNX METAL (CAP)	-10.14%
CNX REALTY (EQUAL)	-15.30%	CNX PSU BANK (CAP)	-12.60%
CNX PSU BANK (EQUAL)	-17.19%	LIX15 Midcap (CAP)	-16.52%
LIX15 Midcap (EQUAL)	-17.66%	CNX REALTY (CAP)	-17.55%

Trend Model Summary

Index	Signal	% From Peak	Day of Peak
CNX AUTO	LONG	7.17	2015-Jan-27
CNX BANK	LONG	10.62	2015-Jan-27
CNX ENERGY	LONG	25.82	2008-Jan-14
CNX FMCG	LONG	11.66	2015-Feb-25
CNX INFRA	LONG	47.92	2008-Jan-09
CNX IT	LONG	88.10	2000-Feb-21
CNX MEDIA	LONG	24.66	2008-Jan-04
CNX METAL	LONG	58.47	2008-Jan-04
CNX MNC	LONG	3.71	2015-Mar-12
CNX NIFTY	LONG	6.84	2015-Mar-03
CNX PHARMA	LONG	12.76	2015-Apr-08
CNX PSE	LONG	24.69	2008-Jan-04
CNX REALTY	SHORT	90.21	2008-Jan-14

A perk up in momentum metrics: RS-Spread has reverted to mean; bank and financials are showing some green shoots.

Categories Your Money Tags index, momentum, weekly

Correlation Update 27.06.2015

stockviz June 27, 2015June 27, 2015

Nifty one year daily return correlations

Nifty one month daily return correlations

Bank Nifty one year daily return correlations

Bank Nifty one month daily return correlations

Midcap one year daily return correlations

Midcap one month daily return correlations

A lot of thick blue squares mean that positive correlations are high. Red squares mean negative correlations are high. Whites are the doldrums.

Categories Your Money Tags correlation, weekly

Momentum should be part of every portfolio

shyam June 20, 2015

The Two Anomalies in Finance

Momentum and Value remain the two “anomalies” in finance. The Efficient Market Hypothesis cannot explain why value investing, where investors pick up “under-priced” stocks, and momentum investing, where investors bet on stocks that have already run up, give out-sized returns compared to the rest of the market. After all, aren’t markets supposed to discover the “right” price and negate these effects?

Investing in Momentum

Value investors get a lot of face-time in media – people like to hear about stocks that are “hidden gems” that can suddenly come alive and give out-sized returns. However, very little is spoken about momentum investing. This results in investment portfolios that are underweight momentum.

The problem with momentum investing are the large draw-downs. When momentum stocks tank, they do so spectacularly. The draw-down keeps away most mutual funds from seriously pursuing this strategy: a) they can’t get out easily, and b) if they show too much volatility, investors will revolt.

But individual investors don’t have these constraints if they learn to embrace volatility.

Comparing Momentum Returns

Our FundCompare tool allows you to see how momentum investing has fared over different time-frames and compare their returns to whatever mutual fund you own. For example, if you compare Momentum with the ICICI Value Discovery Fund, here’s how the monthly returns compare:

Between 2014-01-01 and 2015-06-18, Momentum has had an IRR of 70.16% vs. ICICI Prudential Value Discovery Fund’s IRR of 50.05%

How much should you invest?

Risk, at the end of the day, is whatever allows you to sleep at night. You could start with a 10% allocation and scale till you reach your limit. Whichever way you choose to go bout it, our Momentum Theme will be ready for you.

Categories Investing Insight, Your Money Tags momentum

Weekly Recap: What is Life?

shyam June 20, 2015

world.2015-06-12.2015-06-19

Equities

Major
DAX(DEU)	-1.40%
CAC(FRA)	-1.75%
UKX(GBR)	-1.10%
NKY(JPN)	-1.14%
SPX(USA)	+0.75%

MINTs
JCI(IDN)	+1.00%
INMEX(MEX)	+0.60%
NGSEINDX(NGA)	-1.08%
XU030(TUR)	+2.55%

BRICS
IBOV(BRA)	+0.89%
SHCOMP(CHN)	-13.32%
NIFTY(IND)	+3.03%
INDEXCF(RUS)	+0.65%
TOP40(ZAF)	+0.09%

Commodities

Energy
Brent Crude Oil	-1.87%
Ethanol	+0.88%
Heating Oil	-2.07%
Natural Gas	+2.32%
RBOB Gasoline	-3.63%
WTI Crude Oil	-1.28%

Metals
Palladium	-3.98%
Silver 5000oz	+1.90%
Copper	-3.70%
Gold 100oz	+1.74%
Platinum	-0.96%

Currencies

USDEUR:-0.67% USDJPY:-0.66%

MINTs
USDIDR(IDN)	-0.03%
USDMXN(MEX)	-0.38%
USDNGN(NGA)	+0.05%
USDTRY(TUR)	-0.77%

BRICS
USDBRL(BRA)	-0.53%
USDCNY(CHN)	+0.02%
USDINR(IND)	-0.78%
USDRUB(RUS)	-2.09%
USDZAR(ZAF)	-1.78%

Agricultural
Coffee (Arabica)	-4.41%
Coffee (Robusta)	+6.65%
Lean Hogs	-6.93%
Lumber	+1.63%
Orange Juice	-2.23%
Corn	+0.00%
Cotton	-0.84%
White Sugar	+0.40%
Feeder Cattle	-0.04%
Cattle	-0.30%
Cocoa	+0.62%
Soybean Meal	+1.86%
Soybeans	+3.33%
Sugar #11	-5.12%
Wheat	-3.07%

Credit Indices

Index	Change
Markit CDX EM	-0.21%
Markit CDX NA HY	-0.84%
Markit CDX NA IG	+4.06%
Markit iTraxx Asia ex-Japan IG	+2.43%
Markit iTraxx Australia	+3.39%
Markit iTraxx Europe	+9.01%
Markit iTraxx Europe Crossover	+36.53%
Markit iTraxx Japan	+4.22%
Markit iTraxx SovX Western Europe	+2.81%
Markit LCDX (Loan CDS)	+0.00%
Markit MCDX (Municipal CDS)	+0.97%

China is going through whatever India went through in the 90’s. Europe is going through their quarterly Greece-related gyrations. And Indian markets woke up…

Index Returns

For a deeper dive into indices, check out our weekly Index Update.

Market Cap Decile Performance

Decile	Mkt. Cap.	Adv/Decl
1 (micro)	+1.32%	68/58
2	+2.63%	64/62
3	+2.92%	67/59
4	+4.06%	65/60
5	+3.86%	67/59
6	+3.84%	76/50
7	+2.58%	66/59
8	+2.74%	63/63
9	+2.69%	68/58
10 (mega)	+2.70%	63/63

Rally across the board…

Top Winners and Losers

EICHERMOT	+11.73%
RELIANCE	+12.00%
GLENMARK	+12.36%
MCDOWELL-N	-6.31%
VEDL	-4.87%
CONCOR	-4.65%

This stopped making sense a long time ago…

ETF Performance

NIFTYBEES	+2.96%
JUNIORBEES	+2.60%
CPSEETF	+2.39%
BANKBEES	+2.12%
PSUBNKBEES	+1.52%
GOLDBEES	+0.51%
INFRABEES	-1.00%

There is talk about #gold #bonds being floated around by the RBI. After the tepid reaction to inflation-linked bonds and gold-deposits, you would think they would approach this topic with a bit more humility…

Yield Curve

Bond Indices

Sub Index	Change in YTM	Total Return(%)
GSEC TB	+0.13	+0.11%
GSEC SUB 1-3	+0.07	+0.20%
GSEC SUB 3-8	-0.16	+0.99%
GSEC SUB 8	-0.03	+0.59%

A smart recovery at the middle…

Investment Theme Performance

Momentum	+6.70%
Textile, Metals, Chemicals, Paper and Energy Quality to Price	+6.36%
Financial Strength Value	+5.75%
High Beta	+4.92%
Next Trillion	+4.83%
Quality to Price	+4.33%
ASK Life	+3.83%
Balance Sheet Strength	+3.31%
Magic Formula	+2.78%
Auto and Consumer Goods Quality to Price	+2.64%
CNX 100 Enterprise Yield	+2.59%
PPFAS Long Term Value	+2.50%
Low Volatility	+2.17%
The RBI Restricted List	+1.71%
Media, Health, IT, Telecom, Services, Pharma Quality To Price	+1.70%
ADAG stocks	+0.68%
Tactical CNX 100	+0.00%

Guess who’s back? Momentum!

Equity Mutual Funds

Best
MOSt Focused Midcap 30-Regular Plan-Growth Option	+4.64%
SBI Smal & Midcap – Regular Plan – Growth	+4.40%
Birla Sun Life Advantage Fund – Regular Growth	+4.34%
JM Multi Strategy Fund – Growth option	+4.26%
Sundaram S.M.I.L.E.Fund-Growth	+4.26%
DSP BlackRock 3 Years Close Ended Equity Fund – Regular Plan – Growth	+4.26%
Sundaram S.M.I.L.E.Fund-iNST Growth	+4.25%

Worst
Principal Global Opportunities Fund-Growth Option	-0.53%
Religare Invesco Pan European Equity Fund – Regular Plan – Growth Option	-0.70%
Birla Sun Life International Equity Fund Plan A- Growth	-0.77%
Bsl Comm Eq Fund – Global Agri Plan – Growth	-0.85%
Franklin Asian Equity Fund – Growth Plan	-0.91%
Reliance Japan Equity Fund- Growth Plan- Growth Option	-1.91%
Mirae Asset China Advantage Fund – Regular Plan Growth Option	-4.19%

Bond Mutual Funds

Best
Birla Sun Life Govt, Securities Long Term Fund-Plan B (Growth)	+1.92%
ICICI Prudential Long Term Gilt Fund – Regular Plan – Growth	+1.74%
L&T Gilt Fund-Growth	+1.71%
Religare Invesco GILT Fund – Long Duration Plan – Growth	+1.71%
Canara Robeco Gilt PGS – Regular Plan – Growth	+1.66%
UTI – GILT ADVANTAGE-LONG TERM-GROWTH	+1.66%
IDFC Dynamic Bond Fund -Regular Plan-GROWTH	+1.65%

Worst
Franklin India Dynamic Accrual Fund-Growth	+0.45%
Birla Sun Life Corporate Bond Fund – Regular Plan – Growth	+0.41%
Escorts Income Plan-Growth	+0.39%
Baroda Pioneer Credit Opportunities Fund -Plan B-Growth Option	+0.37%
Baroda Pioneer Credit Opportunities Fund -Plan A -Growth Option	+0.35%
DWS Premier Bond Fund – Regular Plan-/-Growth Plan	+0.20%
DWS PREMIER BOND FUND INST PLAN GROWTH	+0.18%

Thought for the weekend

Categories Your Money Tags weekly

Index Update 20.06.2015

stockviz June 20, 2015June 20, 2015