Our proprietary "moving alpha" distills the non-market-driven component of ETF returns. Alpha is shown to have near-term persistence. Positive-alpha ETFs tend to continue with modest but profitable relative strength; negative-alpha ETFs tend to continue with modest but profitable relative weakness. When the positive and negative alphas are hedged against each other, the result is a low variance upward path with almost no market correlation.
Here is a chart showing cumulative monthly gross alpha-hedged performance rotating among iShares and ProShares "style box" ETFs (large, mid-cap, small; growth and value). Note there is essentially no relation to market trend. The iShares hedge has an average annual rate of 7.76% with half the volatility and no correlation to the S&P. The ProShares leveraged hedge (starting in 2007) has an average rate of about 14%.
|ETF Alpha Hedge|
Click here for a summary analysis of how this remarkable alpha hedge works (2 pages pdf).
Carpenter Analytix moving alpha has application in a range of ETFs, mutual funds and sector analysis.
To enquire about ETF services, leave a message below, or at the Contact link.