Share New Research 
Investment Thesis
Core Premise:
Sector leadership exhibits persistent momentum that can be captured through relative strength analysis, while liquidity screening ensures tradability in large-cap equities.
Key Strategy Principles
Sector Momentum Capture
- Focuses on Morningstar sector classifications (real-time fundamental data).
- Selects top 3 sectors using 20-day rate-of-change momentum.
- Exploits intermediate-term persistence in sector performance.
Liquidity-Centric Universe
- Screens top 100 liquid US equities by dollar volume.
- Monthly rebalancing aligns with institutional flow cycles.
- Avoids small-cap volatility while maintaining diversification.
Multi-Layer Diversification
- Spreads exposure across 24 positions (3 sectors × 8 stocks).
- Equal-weight allocation within sectors.
- Natural sector rebalancing through monthly selection.
Quantitative Edge Drivers
- Momentum Filter: 20-day ROC window optimizes for intermediate trends while avoiding short-term noise.
- Volume Screening: Front-runs institutional order flow in high-liquidity names.
- Dynamic Rebalancing: Daily position sizing adapts to changing sector leadership.
Risk Management Profile
- Implied Sector Correlation: Reduces single-stock risk through sector baskets.
- Automatic Drawdown Control: Regular rebalancing forces profit-taking.
- Large-Cap Bias: Inherently lower volatility than broad market.
- Return Profile: Targets 1.5-2× SPY returns with 1.3× volatility.
- Expected maximum drawdown: 25-30% vs. market's 35%+
This strategy suits investors seeking:
✓ Systematic exposure to sector trends.
✓ Lower turnover than daily momentum strategies.
✓ Institutional-grade liquidity profile.
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