Monday, April 29, 2013

The ETF Global Quant and Green Diamond models are closely related predictive ranking systems applied to the universe of equity ETFs in existence for a year or more.  The heart of each is our Fundamental and Behavioral scoring methods that combine traditional security analysis with modern behavioral finance.  The Fundamental Scores analyze ratios of price to earnings, cash flow, book value and dividends in an historical context while the Behavioral Scores look at technical factors like momentum and relative strength over various time spans, as well as contrarian sentiment measures.  Quant includes other measures relating to global themes and quality, some of which get incorporated into the broad Red Diamond Risk Ratings which are not predictive but cover all products.  A good way to see how the models differ is in the ETFGsm Scanner.

Risk, Reward, and Quant are default displays in Scanner but you can set many more with the Filter function; Focus gives a feel for what is ranking well in the models. Clicking twice on Quant will sort the population with today’s highest ranked SPDR S&P 500 Fund (SPY) up top.  A quick glance shows Quant’s focus continues to be US broad market funds but some sector funds also appear.  Clicking twice on Reward sorts by the highest Green Diamond Reward Ratings led by the PowerShares KBW Insurance Portfolio Fund (KBWI) as today’s 10 Green Diamond fund.  You can read about that one on Thursday’s post or take a closer look at it and any other funds by checking their Compare boxes and then the Compare button next to Filter.  We like to display fundamental and performance measures which show KBWI as cheaper than SPY and outperforming it recently.  Clicking on Quant Report shows our selections on a dedicated Quant screen for a different kind of detail. 

KBWI’s recent performance gives it a very strong 80.2 technical score but SPY does better on sentiment so each balance out to decent high 60s Behavioral Scores.  Even though insurance typically trades at a discount to the market, KBWI’s fundamentals are cheaper than usual expressed in its very high 91 Fundamental Score so they have kept pace with the strong chart.  Being all US gives SPY a better country score then KBWI’s Ireland and Bermuda exposure and size and diversification also boost SPY on those lesser weighted categories. 

Country, liquidity and diversification are factors in the Red Diamond Risk Ratings that was covered last Wednesday.  We have noticed the average of the top ranked funds creeping up with today’s top 10 at 4.63 compared to today’s all equity average of 4.78.  If you have questions on anything you see at ETF Global please ask us at

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