Monthly Momentum Strategy In SPY and EEM
There are many ways to utilize monthly momentum in SPY and EEM:
I have over the last week written two articles about momentum:
The third looks at rotating between the two most popular stock ETFs: SPY and EEM.
The assumptions are like this:
- It’s based on monthly data in the ETFs SPY and EEM.
- Every month rank them based on last month’s performance and go long the best performing.
- Hold for one month and repeat (or continue being long the same instrument).
Pretty simple, and the equity curve looks like this:
The strategy outperforms buy and hold for both ETFs, but the drawdown is bigger compared to momentum in SPY/TLT. Bonds lower the drawdowns a lot.
I have tested different lookback periods and holding times, but it seems monthly performs the best.
FAQ:
– What is the Monthly Momentum Strategy in SPY and EEM?
The Monthly Momentum Strategy involves utilizing monthly data in ETFs such as SPY and EEM. The strategy ranks these ETFs based on their previous month’s performance and goes long on the best-performing ETF. This process is repeated every month, creating a systematic approach to trading.
– Which ETFs are considered in the Monthly Momentum Strategy?
The Monthly Momentum Strategy specifically focuses on two popular stock ETFs: SPY (S&P 500) and EEM (iShares MSCI Emerging Markets). The strategy aims to capitalize on momentum trends within these ETFs.
– How does the Monthly Momentum Strategy work?
The strategy involves ranking SPY and EEM based on their performance in the previous month. The best-performing ETF is then chosen for a long position, held for one month, and the process is repeated. This systematic approach aims to capture momentum trends and enhance returns.