Research

AlphaRank Factor Performance – April 2020

May 12, 2020 – A substantial recovery in risk assets occurred in April, the result of the improved sentiment of market participants on the back of declining growth of COVID-19 cases along with unprecedented fiscal and monetary stimulus from governments and central banks worldwide.

Contrary to March’s market slump, in which the price momentum portfolio generated positive double-digit returns as the market declined, April’s market rally caused the price momentum portfolio to notch a double-digit decline.

The quick and violent reversal of previously underperforming junk stocks led the price momentum portfolio to decline -20.2% in Canada and -27.8% in the U.S. Although the Canadian operating momentum and value portfolios notched gains in April, they were insufficient to offset losses caused by the short price momentum basket. All five U.S. factor portfolios were down for the month, although the quality portfolio finished near-flat.

Nonetheless, the multi-factor portfolio fell -10.2% in Canada and -17.9% in the U.S. in April, led by losses in the short momentum portfolio.

The wild results amongst various factor portfolios over the past two months, with price momentum going from best to worst performing factor portfolio, lend credence to a multi-factor approach to long-short investing, which can lead to not only higher consistency but also lower volatility in results.

AlphaRank Factor Performance represents the daily historical performance of Accelerate’s proprietary model factor portfolios.

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