COMPOSITE MACRO ETF WEEKLY ANALYTICS (4/02/2016)

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COMPOSITE MACRO ETF WEEKLY ANALYTICS (4/02/2016)

Notable Observations and Trends:

  • The Precious Metals Miners composite has exploded over the last 126 and 66 days gaining ~+33, ~+37% respectively. That nearly doubles the next best performer for L/126 days and is just over 2.5x the second best performer over L/66 days. 
  • Precious Metals + Miners finally took a breath over the last 21 days as they lost ~ -3% and ~-2% respectively. 
  • Healthcare looks interesting again. It has been the third worst performer L/252 days losing investors almost -20%. Looking at the Best/Worst line plot L/66 days, Healthcare returns appear to have formed a base. Performance is positive since mid February 2016. Healthcare was the top performer L/10 days gaining ~+5%. 
  • Telecom has notable potential tailwinds. On a momentum basis the Telecom composite has been a top 3 performer for the L/252, L/126, L/10 days. On a fundamental basis, the ICC's of IXP and VOX are both >7% putting them in the upper half of investor's expected returns, compared to all ETFs.
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COMPOSITE MACRO ETF WEEKLY ANALYTICS (3/19/2016)

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COMPOSITE MACRO ETF WEEKLY ANALYTICS (3/19/2016)

Notable Observations and Trends:

  • Last 252 days the only Composites with positive returns are the "defensive" sectors: Utilities, Consumer Staples, Telecom, Precious Metals, and Treasuries
  • Last 252 days all Composites have negative rolling risk adjusted returns as shown in the Scatterplot.
  • There are still concerns that Energy and Oil + Gas showing strong performance over the last 10 and 21 days is simply short covering and momentum traders. Fundamentally that question will be answered by tracking Oil inventories vs production. 
  • Are the AsiaPacific and Emerging/Frontier composites finally being repriced to the upside or are we simply in a "risk-on" environment where high beta is being purchased indiscriminately? This is something to pay attention to as the Implied Cost of Capital estimates show these two composites have the highest implied returns (most undervalued) over the next year. 
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USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/05/16)

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FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

To see the origin of this series click here

In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio. The ETF's are selected from the following groups:

PORTFOLIO SIX:

LONGS: IJR, ACWI, IJH, KBE, VWO, XLY, XLU, IYG

SHORTS: EWU, XHB, VXUS, VPU, IXC, EWW, VGK, EPI

PORTFOLIO SEVEN:

LONGS: RTH, FDN, IDU, EPI, HACK, XLU, IYG, HEDJ

SHORTS: EWA, MOO, VOX, VGK, EWH, EWW, IAU, IJR

PORTFOLIO EIGHT:

LONGS:  IYG, XLP, EWW, EPI, MDY, XLU, IYR, IAU

SHORTS: HEDJ, INDA, IWB, VXUS, EWS, EZU, EWU, LQD

PORTFOLIO NINE:

LONGS:  HACK, EWW, XLV, XLY, XLB, ECH, IVV, IYE, XLP

SHORTS: KRE, VO, XHB, VXUS, HEDJ, XRT, FEZ, BND

CUMULATIVE GROSS PRICE RETURN (ALL PORTFOLIOS)

PORTFOLIO TEN:

LONGS: IYZ, HACK, MOO, HEDJ, XLY, TLT, IYT, FEZ, XLV

SHORTS: LIT, RWO, VO, IXC, ECH, RWX, BIL, EWI, KIE

COMPOSITE MACRO ETF WEEKLY ANALYTICS (3/05/2016)

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FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

LAYOUT (Organized by Time Period): 

  1. Composite ETF Cumulative Returns Momentum Bar plot

  2. Composite ETF Cumulative Returns Line plot

  3. Composite ETF Risk-Adjusted Returns Scatter plot (Std vs Mean)

  4. Composite ETF Risk-Adjusted Return Correlations Heatmap (Clusterplot)

  5. Implied Cost of Capital Estimates

  6. Composite ETF Cumulative Return Tables

  7. Notable Trends and Observations

COMPOSITE ETF COMPONENTS:

Notable Trends and Observations

LAST 252 TRADING DAYS

Last 126 trading days

year-to-date last 46 trading days

Last 21 trading days

last 10 trading days

Implied Cost of Capital Estimates:

To learn more about the Implied Cost of Capital see here.

CATEGORY AVERAGE ICC ESTIMATES

ALL ETF ICC ESTIMATES BY CATEGORY

Cumulative Return Tables:

Notable Observations and Trends:

  • Precious Metals Miners (PMM) continue to dominate all other composites appearing as the number one outperformer several weeks in a row across multiple timeframes. This week the PMM composite is number one across the last 126 days through the last 10 days.
  • Healthcare has continued to underperform this year and while it had positive returns over the last 10 days it was still a bottom 3 performer. 
  • The markets were "Risk-on" with with T-Bonds underperforming for the last 21 days while even the Oil and Gas composite rallied towards the end of the week and finally disappeared off the worst 3 performers list last 10 days.
  • Are these bullish signs that risky assets will continue to gain, or is the market simply in a cyclical mean reversion regime where we should expect buying to be met by selling and selling to be met with more buying? The answer remains to be seen...

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (2/27/16)

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FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

 

To see the origin of this series click here

In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio. The ETF's are selected from the following groups:

PORTFOLIO FIVE

Longs: VO, GDX, XHB, XLB, HACK, XLY, XLP, XLU

Shorts: ACWI, VWO, IYJ, VB, VPU, ECH, VGK, IWB

PORTFOLIO SIX:

LONGS: IJR, ACWI, IJH, KBE, VWO, XLY, XLU, IYG

SHORTS: EWU, XHB, VXUS, VPU, IXC, EWW, VGK, EPI

PORTFOLIO SEVEN:

LONGS: RTH, FDN, IDU, EPI, HACK, XLU, IYG, HEDJ

SHORTS: EWA, MOO, VOX, VGK, EWH, EWW, IAU, IJR

PORTFOLIO EIGHT:

LONGS:  IYG, XLP, EWW, EPI, MDY, XLU, IYR, IAU

SHORTS: HEDJ, INDA, IWB, VXUS, EWS, EZU, EWU, LQD

CUMULATIVE GROSS PRICE RETURN (ALL PORTFOLIOS)

PORTFOLIO NINE:

LONGS:  HACK, EWW, XLV, XLY, XLB, ECH, IVV, IYE, XLP

SHORTS: KRE, VO, XHB, VXUS, HEDJ, XRT, FEZ, BND