We’re making a few changes to the site, including the additon of this blog. If you’re not into following blog postings don’t fear, I don’t foresee this being a high volume blog; but there are a few thoughts I’d like to present and the blog structure makes publishing fairly painless.
Those of you that accessed the Screener this morning should have seen that we’ve added some new fields and made other minor changes. The fields that you might be interested in include a full spectrum of APR values, from 1 day to 1 year. Some of the active traders asked for this a while back, a few problems later and it’s finally here. We’ve also expanded the SMA series with values from 10 days to 200.
The addition I’m most excited about is the new Portfolio Feature. It still has a little fine tuning to be done but really needs some usage and testing.  Some people call them watch lists and others call them portfolios. Whatever you call it, you can now create your customized list, or lists, and always have them easily accesible. Of course this requires a free registration and a login so we know who’s portfolios are who’s, but that’s a small price to pay for the convenience. The really neat thing about the new portfolio feature is that you can select your own columns of data along with your own default sort order. So register, then log-in, and create your own Portfolio.
While you’re waiting on that registration email check out a couple of portfolios that I created. They’re nothing special, just demonstrating what can be done.
Most Active funds with a default layout. This is a new version table showing the old default columns. This is a good place to point out that portfolios are more or less public and you can easily share a link with you email or discussion list friends. You will see above the top right corner of the table a link to Personalize this Portfolio. Once you are logged in you can make changes to my portfolio and save it as your own. If this were your portfolio you would have a link in this same location to Edit the Portfolio.
My Country Funds TA portfolio is a list of Single Country funds with an assortment of Technical Indicators shown. This table is sorted by the 2-day RSI value by default, but you can sort by any column just like you could with the legacy tables.
To access your portfolios just go to the My Pages link on the header navigation bar. Where, you ask? Right next to the Blog link – but you’ve got to be logged in.
That’s enough to get you started.  Please share your comments so we can solve any annoyances and stomp out any bugs that might be hiding.  I’ve just noticed a little problem with background colors when values are missing, so no need to point that one out. I’m sure there are more.
Hello blog owner,
I like your website; ’tis a very useful tool. However, I would appreciate your symbology being defined. For example, what is RSf? I gather it means “relative strength factor,” but what kind of relative strength? Presumably, it is not RSI or performance strength relative to $SPX. What exactly is it, and how is it calculated?
Thanks,
Skookum
Hello Skookum, thank you for your comments.
As stated on the RSf Trends page, “Relative Strength Factor(RSf) is a percentile ranking of the fund’s performance relative
to other funds and relative the broad U.S. market performance. It is measured over 1 year and
weighted to emphasize more recent performance. The values for RSf range from 0 thru 99 with the
better performing funds having higher values. ” The precise formula for RSf is proprietary but is calculated from total returns for various periods over the past year. The goal of the unequal weighting is to have the stability of the longer term performance, but also the responsiveness of the shorter term measures. I hope this helps answer your questions,
Hugh.
H,
Could you add RRS measures to the Portfolio section.
Any chance we can see a more robust backtester (TOP# …) ?
Thanks for the site.
J
J –
Thanks for the comment. We should be able to add RRS measures fairly easily. We are evaluating the market and the technology required to support a more robust backtester. At this point I would say I am positive on the feature, but we have more evaluation to be done. I have a couple of backtesters running on other sites and will say this is not something that will be available in the next few weeks. I would welcome any expectations you might have regarding how such a backtester should work. Thanks, Hugh
H,
I think a good start would be the ability to choose a number of stocks to hold (top 3 or 5 of a sort for example). Another feature would be the ability to backtest certain baskets or portfolios of etfs.
An example of this sort of thing that I think is implemented well is found at etfreplay.com.
Thanks again,
J
Hugh,
Thank you for your response. I didn’t see an explanation anywhere, but I will go read, more thoroughly, your RSf trends page.
Do you have any performance information regarding RSf? I had read elsewhere that RS wasn’t reliable except at a minimum time period of 6 mo or longer, in terms of ranking equities by total return over that period. RSf appears to be fairly squirrelly, jumping around quite a bit from day to day. I imagine that’s because you are interested in day trading? I’m not, so I’m looking for an performance indicator that is likely less volatile than RSf appears to be. Would it be possible, for example, to offer an option to calculate RS(6-mo) if desired?
Thanks,
Skookum
RSf, being a blend of multiple periods, is actually more stable than most other means of measuring Relative Strength that I am aware of, except for the regression based formulas. If you are looking for a straight 6 month relative strength then it is available as the 6-month total return. Most sites define RS as the simple return over some time period. Hugh
Hugh,
I discovered your tool for setting up customized portfolios. Tucking the 6-mo return next to the symbol makes tracking that measure of relative strength easy to track. I must admit that 6-mo return is a pretty squirrelly measure, varying quite a bit over short periods of time. However, relative ranks don’t vary nearly as much.
I’ve seen at least two studies that point to relative strength as measured by ranking of 6-mo returns as optimal in terms of producing investment returns. Would you happen to have a study showing your RSf to be better or worse?
Thanks,
Skookum
Skookum,
I don’t have a study I can place my hands on right now, but will try to find my old studies and update them. One thing you should know is that RSf is often not that different from a 6-month total return. If you look at a group of similar funds, like a cGroup for example, you will find a significant direct relationship between RSf and Rtn-6mo. The real difference comes in stability. What I think we will find from the studies is that fund turnover is reduced and risk (downside deviation) is reduced, more than an increase in CAGR. I remember that CAGR went up, but not like the others came down.
One negative in my view regarding 6-month return comparisons are that it is based solely on 2 data points, the first and the last. If either of those is slightly skewed for some reason it can alter the rankings. The positive for using 6-month return is simplicity. When you get more complicated, like weighting various periods, you will find that one weighting works best in one period and a different weighting works best in another. Finding a value that is ‘best’ in all periods is impossible and finding one that is ‘better’ than the market in all periods is probably impossible as well.
– Hugh
Hugh,
The most recent study I’ve seen on the use of relative strength is http://www.dorseywrightmm.com/downloads/hrs_research/Asset%20Class%20Rotation.pdf. Note that Table 2 claims to report returns on an annualized basis, but I’m assuming they are actually 10-year total returns.
The Dorsey Wright simulation study shows that rotating one’s portfolio on the basis of 6-mo relative strength from 2000 to 2010 always beat SPY, always beat AGG, and always beat a portfolio comprised of 60% SPY and 40% AGG. Different time frames for ranking funds by relative strength were used, from 1-mo to 24-mo, and 6-mo generated the optimal performance (a better optimum may lie between 6-mo and 9-mo). The longer the time frame used to rank funds by relative strength, the lower the portfolio turnover (i.e., the longer the time frame, the lower the fees and the less work involved in portfolio management).
In my first message I noted that RSf appeared to be quite squirrelly (i.e., unstable over time). I later noted that 6-mo relative strength was quite squirrelly, too, after monitoring that for a while. I gather your studies are showing RSf to be less squirrelly than 6-mo relative strength. I believe what really matters is how stable the fund rankings based on each measure are.
I conducted a multiple regression of your RSf on the relative strength timeframes you list in your standard table. Because you regard RSf as proprietary, I won’t divulge my results here, but the 3-mo timeframe, as I recall, was dominant, which led me to believe that RSf is more responsive to changes than is the 6-mo relative strength. Enhanced responsiveness seems to me to be contradictory to enhanced stability.
Just some notes. I eagerly await seeing your studies.
Thanks,
Skookum
Skookum,
Enjoyed the Dorsey Wright research, thanks for liniking to it. The results I’ve seen through the years have generally pointed to a 6 month measure being roughly optimum, which is why I used the 6 month return data for the Sector and Country strategies I first posted in 2005. Of course, those studies usually focus on single period momentum measure where RSf is a blended measure.
It does not surprise me that a regression model looking at RSf would indicate a heavy weight on the 3-month term. The site indicates a heavier weighting on the short term. But that is balanced by some weight longer than 6 months.
I think we both view stability as it relates to portfolio turnover, so let me give a quick example using the Sector Strategy. From 2001 through last month that strategy has had a CAGR of 4.5% with 42 trades. Swap the TR126 for RSf and the CAGR is unchaged but the number of trades drops to 36. There is generally a lot of noise in single start date tests, so don’t take too much from it, but I have generally noticed a drop in turnover with RSf, which is why I call it more stable.
It is more heavily weighted to the short term, but there is a balance.
Thanks, I enjoy the discussion,
– Hugh
Hugh,
I found the DW research quite enlightening. Using 6-mo relative strength the annualized return from 2000 through 2009 was 11.8% vs -1.6% for buying and holding SPY. The sector portfolio example you provide, an annualized return of 4.5%, doesn’t seem impressive until compared to a an annualized return of 0.4% for buying and holding SPY over the period of your test. Any system that can beat “the market” by 4 to 14% per year that is relatively easy to implement is a system for me.
Did you mix up your relative strength measures in your example? As I read it the portfolio turnover was lower for the 126-d relative strength than for RSf.
My 17-yr old son opened a small IRA last month. Last night we sat down to populate his account with ETFs. He’s using your site to monitor the 6-mo relative strengths of the Schwab commission-free ETFs. He placed his orders last night and had a return of 0.21% for the day. I told him if he can do that every trading day until he retires his account will be worth about one-quintillion dollars. I just want 1% of that. I’ll split it with you.
Skookum
Skookum,
I wrote that hurriedly the other day and apparently was not very clear. The Sector Strategy uses a 6-month momentum measure (TR126), and had 42 trades from 2000 forward. If you kept everything else the same but changed TR126 to RSf, the number of trades dropped to 36 while the CAGR remained constant at 4.5%. So the turnover was lower with RSf than with TR126.
The CAGR is not overly impressive sounding, I agree. But definitely market beating without using overly aggressive funds. Today you can utilize funds that are much less diversified and focus more tightly on the particular market sectors, if that is what you want to do. It’s a matter of balancing risk and reward, and we are all different in how we balance those.
Regarding your son’s account – don’t you just love the power of compounding returns. Start early and a lot becomes possible down the road.
Hugh
“Relative Strength Factor(RSf) is a percentile ranking of the fund’s performance relative to other funds and relative the broad U.S. market performance. It is measured over 1 year and weighted to emphasize more recent performance”
…relative the broad U.S. market performance…
Is one benchmark used for the broad market, or is a different benchmark used for Fixed Income?
We use the same benchmark for all funds. Using a different benchmark for different funds would break continuity among the numbers. Good question, thanks for asking – Hugh
I got good info from your blog .I like this web blog very much so much excellent information.