Week 20: Momentum Analytics Portfolio update. Week ending May 20, 2022

The portfolio and indexes weekly return

The momentum portfolio outperformed the indexes this week too (but not in a good way*). The following is the weekly total returns for the portfolio compared to the index. As you can see my momentum portfolio lost money but much less than the broad market, So in one way the portfolio did outperform the indices. This is a very good sign, IMO since if the draw downs are less when the markets tank, it think the portfolio has done good job of risk mitigation. 

I am using Morningstar US market index as a benchmark. Thus the portfolio outperformed the market and beat it this week. 

Total Return: measures the theoretical performance of your holdings for a specified period of time, taking into account the beginning and end values of your investments as well as dividends.

Personal Return calculates the investor's returns, taking into account an additional factor in its calculation: the capital that you added or withdrew from your fund or portfolio throughout the specified period of time. The calculation of Personal Return illustrates how your allocation of capital has affected the performance of your portfolio. 

One of the things I have taken away from the last few months of tech/Nasdaq debacle is that there needs to be a risk system in addition to a reward system. The momentum portfolio automatically kicks in the risk mitigation when bullish momentum for stock is worsening and thus capping losses. 

This system worked beautifully well and this draw downs were capped in particularly volatile week.

Positions, Position Sizes and Momentum Updates

The only position that is still in green in AT&T (T), others are in red at the moment. 

Score classification

• Score 0: Super bearish, no entry
• Score 1: bearish, no entry
• Score 2: Hold
  
• Score 3: bullish, entry or hold
  
• Score 4: bullish, entry or hold.

As it turns out the momentum scores can also assist with position sizing, with those that have the most favorable scores-setups have more additions to the positions making those portfolio positions heavier. 

Thanks for reading! Next post will be end of week 21, on or about May 28, 2022. Until then keep tracking the momentum!

Week 19: Momentum Analytics Portfolio update. Week ending May 13, 2022

The portfolio and indexes weekly return

The momentum portfolio did as intended this week too. The following is the weekly total returns for the portfolio compared to the index. 

 

I am using Morningstar US market index as a benchmark. Thus the portfolio did better than the market and beat it this week.
 

Total Return: measures the theoretical performance of your holdings for a specified period of time, taking into account the beginning and end values of your investments as well as dividends.

Personal Return calculates the investor's returns, taking into account an additional factor in its calculation: the capital that you added or withdrew from your fund or portfolio throughout the specified period of time. The calculation of Personal Return illustrates how your allocation of capital has affected the performance of your portfolio. 

One of the things I have taken away from the last few months of tech/Nasdaq debacle is that there needs to be a risk system in addition to a reward system. The momentum portfolio automatically kicks in the risk mitigation when bullish momentum for stock is worsening and thus capping losses. At the same time, if the momentum turns bullish, one can continue to reap reward as long as the underlying market trends support the accumulation of the stock.

Positions and Position Sizes

Positions and sizes

Composition of portfolio

As you can see in the table below, the portfolio is heavily tilted towards consumer defensive and Industrials compared to the SP500. Thus the portfolio is adapting to the prevailing trends in the stock market by weeding out those that are not in favor (technology, financials). I do not invest in health care stocks so it will always be 0 and I think that the energy sector is a little overextended so I have not invested in it these past weeks.

Score classification

• Score 0: Super bearish, no entry
• Score 1: bearish, no entry
• Score 2: Hold
  
• Score 3: bullish, entry or hold
  
• Score 4: bullish, entry or hold.

Momentum updates of stocks in portfolio 

Stocks and their momentum scores at end of the week.

As it turns out the momentum scores can also assist with position sizing, with those that have the most favorable scores-setups have more additions to the positions making those portfolio positions heavier. 

I fixed the issue with the 4th indicator which was giving me some whipsawing - after using MFI derivative, ADX derivative, RRG momentum derivative, I think I have found one to help with clearer signals - Aroon derivative. This is important since I want the indicators to overlap but not have a correlation of 1. Aroon derivative is unique as it is in effect "time over price signal" as opposed to "price signal over time".

Thanks for reading! Next post will be end of week 20, on or about May 21, 2022. Until then keep tracking the momentum!