Most momentum screens measure a stock's price change against the broad index. A sector-relative score measures it against the stock's own sector. The two answers disagree more often than people expect, and the disagreement is the point.
What index-relative momentum hides
When a whole sector rallies, every stock in it shows strong momentum against the index, including the laggards. When a whole sector sells off, every stock in it shows weak momentum, including the leaders. Index-relative momentum is mostly a sector bet in disguise. It tells you which industry the market likes this quarter, which is useful, but it is not information about the company.
What sector-relative momentum shows
Ranking six-month and twelve-month price change inside the sector strips the sector move out. What remains is whether the market is treating this company better or worse than its direct competitors. A stock in the 90th percentile of its sector on momentum is being singled out by other investors for a reason, and that reason is usually visible in the fundamental pillars a quarter later.
Why it is the only price-based pillar
Four pillars are built from filings and move quarterly. Momentum is built from prices and moves daily. It is included because it is the fastest signal that other investors have noticed what the fundamentals show, and it is limited to one pillar out of five because price alone is the easiest signal to overfit.
Reading it in a selloff
A high-quality company selling off with its sector on no company news usually keeps a strong sector-relative momentum rank even while its index-relative momentum collapses. That divergence is the profile of a pullback rather than a breakdown. The reverse, a stock underperforming its sector while the sector rallies, is the profile worth checking for a company-specific problem.
The momentum inputs and their refresh cadence are documented on the Stock Expert AI methodology page. Live sector-relative scores for US-listed stocks are at www.stockexpertai.com.
This is educational content, not investment advice. Past performance does not guarantee future results.
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