Idiosyncratic Momentum Factor - US

Overview

Idiosyncratic momentum, or residual momentum, takes into account the three factors that explain a major part of the variation in average returns - market, size and value. Idiosyncratic momentum forecasts high long-term excess returns, and can be used to differentiate between high momentum stocks whose future returns reverse, and those whose do not.

Data Highlights

Low risk and high return investors would consider the absolute highest performing idiosyncratic momentum stocks, as they outperform the market in almost all key metrics including annual returns, cumulative return and demonstrated alpha. The highest performing portfolio of these securities also have the lowest market correlation, Sharpe ratio, and maximum drawdown.

Performance Showcase

The demonstration of idiosyncratic momentum performance shows the comparison of different idiosyncratic momentum portfolios. Portfolios were rebalanced monthly using a market-cap weighted method, with 20 basis points deducted as costs per transaction.

 
Annual Return
Cumulative Return
Volatility
Sharpe ratio
Calmar ratio
Max Drawdown
Omega ratio
Sortino ratio
Skew
Kurtosis
Tail ratio
Monthly value at risk
Alpha
Beta
SPY
5.20%
132.86
13.84%
0.44
0.10
-50.83%
1.42
0.63
-0.46
2.63
0.99
-0.06
0.00%
1.00
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
6.31% 9.00% 10.63% 9.05% 10.84% 10.21% 9.73% 8.63% 9.21% 7.68%
177.33 320.34 438.73 323.95 455.63 405.10 370.06 297.13 334.30 243.21
22.24% 19.28% 17.23% 16.38% 15.92% 15.98% 14.95% 15.66% 15.10% 15.92%
0.38 0.55 0.67 0.61 0.73 0.69 0.70 0.61 0.66 0.55
0.10 0.14 0.20 0.16 0.24 0.19 0.20 0.18 0.19 0.16
-64.69% -65.92% -53.60% -55.75% -45.26% -54.46% -48.90% -48.01% -47.67% -46.83%
1.40 1.58 1.74 1.63 1.82 1.74 1.77 1.65 1.68 1.54
0.61 0.83 1.09 0.96 1.17 1.09 1.12 0.92 1.01 0.81
0.76 -0.11 -0.04 -0.06 -0.05 -0.11 -0.02 -0.37 -0.41 -0.30
6.89 4.56 4.82 2.23 4.25 3.74 2.44 5.22 2.72 3.63
0.96 1.00 1.13 1.04 1.02 1.03 1.17 0.96 1.04 0.83
-0.10 -0.08 -0.07 -0.07 -0.07 -0.07 -0.06 -0.07 -0.06 -0.07
0.02% 2.69% 4.61% 3.22% 4.99% 4.41% 4.23% 3.10% 3.76% 2.48%
1.41 1.29 1.16 1.13 1.09 1.10 1.03 1.06 1.03 1.03