Punch line: following up on the prior piece, “anatomy of a crowded stock,” and given the market fragility last Friday, I applied the cumulative abnormal return analysis (“CAR”; summation of daily beta-adjusted excess return) to the SPX industry palate, over the 02/11/2016 market-nadir to-date horizon. I ran the CAR for each SPX industry, sorted them in descending order of out-performance, and then charted the top 15 CAR industries shown in the pdf link below.
Shown alongside the charts is the recent CAR trend (trailing 5d, 10d, 15d, 20d & 25d) and, at the risk of transmitting false signals, a qualitative signaling label based on the recent ST CAR trend (using a rules-based algorithm to quantify the qualitative labeling process).
Finally, as a caveat, it is important to note that these are highly noisy processes with the potential for false-signal whipsaw and with the magnitude and horizon/phase length subject to tremendous variability; the analogy might be RSIs which can stay extended for long periods of time with the magnitude of subsequent mean reversion quite uncertain.
Anatomy of crowded industry PDF
Note: calculations Risk Advisors, data Bloomberg
Proprietary and confidential to Risk Advisors