ETF Central » performance

Zoomable Visualization of Market and Sector Performance and Correlation, Nov. 5, 2010

Michael Bommarito — Sat, 06 Nov 2010 14:04:44 +0000

Last week, I posted a zoomable visualization of the weekly market and sector performance and correlation. People seem to find this image both useful and “cool,” so here is this week’s edition and takeaways below:

Green, green, green (on the diagonal). Other than healthcare (XLV), every sector was up at least 1%, and most were up well over 3%.
More green (off the diagonal). Most sectors were strongly correlated with one another, with the exception of financials (XLF) and healthcare (XLV). Healthcare, as noted above, underperformed the market significantly by 2.5%. The story with financials is the opposite – financials were up a whopping 6.8% this week, putting them over 3% ahead of the market.
Correlation was strongest between energy (XLE) and materials (XLB) at 99.5% and weakest between financials (XLF) and healthcare (XLV) at -21.8%.

By the way, this figure is produced with Python and cairo. The code is fairly ugly and long, so I probably won’t release it unless there’s some demand.

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POMO strategies have not outperformed the S&P 500 YTD 2010

Michael Bommarito — Mon, 01 Nov 2010 22:05:39 +0000

Since I’m sick of hearing ZeroHege purposefully misstating the empirical relationship between POMO and the equity market, I decided to put up this little figure below. This figure demonstrates the performance of the S&P 500 (SPY) in solid black compared to two POMO strategies in dashed black and red (close-close and open-close, respectively).

Note that only holding the market on POMO days has not returned more than the buy-and-hold S&P 500 strategy year-to-date. The S&P 500 has returned 3.62% YTD (close-close, not including dividend, which puts the buy-hold strategy even further ahead), whereas the open-close and close-close strategies have returned -2.63 and 0.79% respectively. These strategies do not even outperform the S&P 500 on a risk-adjusted basis (Sharpe). Furthermore, none of the regressions that were significant (p=0.05) in the 2005-2010 dataset are significant (p=0.1) in the 10 months through this year. In other words, though a relationship between the accepted-submitted proportion and return magnitude exists in the dataset as a whole, this relationship appears to have disappeared on the daily timescale. Sorry, Tyler(s).

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Zoomable Visualization of Market and Sector Performance and Correlation, Oct. 29, 2010

Michael Bommarito — Sat, 30 Oct 2010 15:12:37 +0000

What would happen if you took the Index and Sector Summary Heatmap I made last week, blew it up to the size of a 36MP image (6000-by-6000), and then added a plot of the change in correlation over time. Great question! Look below.

Since there’s a lot going on here, let’s summarize what’s going on:

Make sure you zoom into the figure! You can use the scroll wheel on your mouse or two-finger slide on your touchpad to quickly zoom in and out.
Each diagonal cell shows the return of each asset over the past week (6 periods, 5 returns). As an asset increases, the line is colored green, and as an asset decreases, the line is colored red.
The lower left hand corner of each diagonal cell shows the total return of the asset over the past week. There’s also a label down there, in case you’re zoomed in and can’t see the labels on the edge.
The off-diagonal cells show the correlation (5-period return) between two assets. The color of the cell indicates the degree of correlation – more correlated assets are more green, and less correlated assets are more red. In case you’re zoomed in, there’s a label in the lower left hand corner that tells you which two assets you’re looking at.
The off-diagonal cells also show the time series of 5-day return correlation over the past 4 weeks.

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