Wednesday, September 4, 2013

Emerging Markets Produce New 10 Diamond Fund

It had a correction to begin the summer, established a higher low to end it and comes into September outperforming the S&P 500.  When the Powershares BLDRS Emerging Markets 50 ADR Index Fund (ADRE) performed similarly last year, it continued to outperform into early 2013 until breaking down to a lower early summer low.  It was a familiar pattern for emerging markets funds that had scored well last summer and fall before deteriorating early this year.  Correcting into late June got them scoring better and ADRE has been mentioned frequently over the past couple of months that our models have been selecting EM funds to outperform.  With scores similar to our August 26th post, it gets 2nd place in Quant and holds today’s 10 Green Diamond Reward Rating for the first time.

The main difference between our two predictive models is that Quant incorporates all measures in an overall score where the Diamond models separate risk and reward into distinct ratings.  The predictive Green Diamond Reward Rating is equally weighted between Quant’s Behavioral and Fundamental Scores where each day’s highest scoring equity ETF gets the sole 10 Green Diamond Reward Rating.  That had been GXC for most days since late July in an exceptional run of dominance that was well earned by gaining almost 10% over a couple of months when most funds were negative.  It retains an outstanding 9.91 Reward Rating today.  Regular readers will also remember PWO earning 10 Green Diamonds on so many days in the spring and dominating into early July when its smart beta quarterly portfolio reconstitution failed to excite our models and subsequently underperformed.  Only time will tell if ADRE is poised for another such run or is a typical 10 Diamond fund for a handful of days over a few weeks.  Either way, today’s rating suggests an excellent chance of outperforming over coming months.  It too is a smart beta fund whose portfolio can change significantly at each quarterly reconstitution so keep an eye on those daily scores.

ADRE’s above average 5.03 Red Diamond Risk Rating is skewed by high volatility and deviation measures but comes in lower than most EM funds.  Its 100% exposure to US dollars helps on the reflective Risk Rating where higher scores imply higher risk.  If this fall resembles last for emerging markets funds, that volatility can be your friend.  Thanks for checking into ETF Global® Daily Perspectives.

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