We created a sentiment weighted sector portfolio started January 1st
To showcase the strength and usability of our sentiment data we have created a sentiment weighted sector portfolio started 01-01-2022. It relies solely on the absolute sector sentiment for transparency reasons. However, the inclusion of sentiment volatility (risk adjustment) and sentiment growth indices (trend) would have further enhanced the performance.
Below calculations are based upon STOXX Global 1800 indices. All the 1800 underlying stocks´ corporate news flows are tracked and aggregated into relevant sectors defined by the index provider. Tracking a known index provider facilitates easy implementation of mentioned sector strategy using ETFs.
As our sector sentiment is focused on corporate news flow, the sentiment assessment only includes market participants´ opinions regarding this news flow. It generates a highly relevant sentiment flow on a sector level. To incorporate this news flow into our portfolio, we have only included sectors with an absolute average positive sentiment in each period. The portfolio is updated each month on the 14th and end of the month. Finally, the portfolio is being equaled weighted when updated. To avoid any bias, we process more than 100.000 articles daily based on more than 450 sources.
The results so far this year can be viewed below. Our sentiment weighted sector portfolio has outperformed in all stated periods except one and generates a total YTD outperformance of 8 percentage points in the period from January to mid-March. At the start of January, the sector portfolio included Energy, Utilities, Travel and Leisure, Basic material, Insurance, Construction and Material, Telecommunication, Food, Beverage, and Tobacco. Food, Beverage, and Tobacco sector when into negative sentiment territory and was excluded from the portfolio on 14-02-2022 whereas the personal care, drug, and grocery stores sector were included in the portfolio from 14-02-2022.
Sector sentiment is difficult to collect and process, but the underlying logic is simple. By only including sectors with a positive corporate news flow assessed by professional market participants, we secure our portfolio has a positive outlook in terms of earnings versus current valuation. A short version could easily be created using the opposite logic.
The sector sentiment is available in our GUI and as indices delivered through FTP- and API-feed.
