I'm curious to learn about overall performance of the P123 community over the last 1 - 2 months. I'm experiencing a “cluster drawdown” coming partly from industry / sector momentum underperformance, beta rally but also a complete inversion of idiosyncratic correlations (that's ongoing for exactly 1 month now).
The correlation breakdown is the concerning part as I do not expect this in such market conditions. I run a pca on the portfolio variance to find latent risk factors but nothing is really revealing.
Same here. I am in micro/small so my benchmark is the R2K. I have never seen such an underperformance of my ports to the R2K. I have tested 2 pretty similar systems with 40 stocks and IndWt<10, so pretty diverse, and one has a YTD performance of 20%, the other 2%. The dispersion of returns in this space is unreal right now.
Pro against beta strategies (low volatilily strategies) should suffer in this kind of scenarios of Inversion, moreover strong momentum strategies should fly (some years ago people, studies says that pure momentum strategies were over)...but all in all sooner or later will reverse...it's seems that some factors never die however it's decay. With AI factors of course this could be mitigated cause take into consideration non-linear relations...
Same here, using only out-of-sample returns. The only comparable period for me is June through October 2024, which was slightly worse. I've been using ranking systems since 2015, and have never seen anything like those two periods.
Perhaps, though, that's because I've been doing a good deal of hedging of my portfolio since 2024, and that wasn't the case earlier. If I decompose my returns into the long only portion, there were significantly worse periods: late 2019 and early 2020; late 2022; late 2024.
Seeing the same pattern over the last 2–3 months, I’d say this rally has been characterized by narrow breadth, with leadership concentrated in lower-quality names (most shorted stocks, unprofitable tech, high beta).
So I’m not too concerned. I expect performance to catch up eventually.
Yes, I see it's happening to me too, but I've also managed to combine it with bad timing on my part, sitting in cash because I was afraid of what was going to happen and mistimed the sale of gold holdings, but Europe has somewhat rescued me, but NOK is altso a drag:
