Dual ETF Momentum Tool (New!)

Last December I posted multiple “Dual Momentum” tests that were inspired by a paper written by Gary Antonacci and available on Optimal Momentum. I received positive feedback from the first two articles (they are available here and here) so I have launched a new “Dual ETF Momentum” spreadsheet.

The spreadsheet is available on Scott’s Investment’s here. The objective of the spreadsheet is to track four pairs of ETFs and to present an “Invested” signal for the ETF in each pair with the highest relative momentum. Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury bill ETF (a “cash” filter). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of the cash ETF. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns.

The selection of each pair of ETFs was intended to stay as true as possible to Antonacci’s article, which was based on indices, not ETFs. However, there are several other ETFs which could be easily substituted for the ones listed on the spreadsheet.

As an added bonus, the spreadsheet also has four additional sheets using a dual momentum strategy with broker specific commission-free ETFs. It is important to note that each broker may have additional trade restrictions and the terms of their commission-free ETFs could change in the future. Also, the dual momentum strategy has historically had relatively low turnover.

Below are the five portfolios along with current signals. If you enjoy these types of tools and articles, please also consider making a donation via the Paypal link on the homepage of Scott’s Investments:

Dual Momentum Return data courtesy of Finviz
Equity Representative ETF Quarterly % Total Returns Half Year % Total Returns 1 Year % Total Returns Signal (based on 1 year returns)
US Equities VTI 10.27 10.86 15.08 Invested
International Equities VEU 9.42 12.95 9.27
Cash SHY 0.09 0.14 0.3
Credit Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
High Yield Bond HYG 2.89 4.45 8.8 Invested
Interm Credit Bond CIU 0.02 1.58 5.11
Cash SHY 0.09 0.14 0.3
Real-Estate Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Equity REIT VNQ 7.86 6.1 13.5
Mortgage REIT REM 10.58 10.58 22.46 Invested
Cash SHY 0.09 0.14 0.3
Economic Stress Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Gold GLD -2.96 3.38 -4.79
Long-term Treasuries TLT -4.94 -5.93 3.2 Invested
Cash SHY 0.09 0.14 0.3
TD Ameritrade Commission Free
Equity Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
US Equities VTI 10.27 10.86 15.08 Invested
International Equities VEU 9.42 12.95 9.27
Cash SHY 0.09 0.14 0.3
Credit Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
High Yield Bond JNK 2.61 4.6 8.91 Invested
Interm Credit Bond CIU 0.02 1.58 5.11
Cash SHY 0.09 0.14 0.3
Real-Estate Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Equity REIT VNQ 7.86 6.1 13.5
Mortgage REIT** REM 10.58 10.58 22.46 Invested
Cash SHY 0.09 0.14 0.3
Economic Stress Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Gold** GLD -2.96 3.38 -4.79
Long-term Treasuries TLT -4.94 -5.93 3.2 Invested
Cash SHY 0.14 0.3
**COMMISSIONS APPLY. NO VIABLE COMMISSION FREE ETF AVAILABLE FROM  BROKER
Vanguard Commission Free
Equity Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
US Equities VTI 10.27 10.86 15.08 Invested
International Equities VEU 9.42 12.95 9.27
Cash VGSH 0.1 0.18 0.36
Credit Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
High Yield Bond** JNK 2.61 4.6 8.91 Invested
Interm Credit Bond BND -1.33 -0.68 1.88
Cash VGSH 0.1 0.18 0.36
Real-Estate Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Equity REIT VNQ 7.86 6.1 13.5
Mortgage REIT** REM 10.58 10.58 22.46 Invested
Cash VGSH 0.1 0.18 0.36
Economic Stress Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Gold** GLD -2.96 3.38 -4.79
Long-term Treasuries VGLT -4.28 -4.67 3.41 Invested
Cash VGSH 0.1 0.18 0.36
**COMMISSIONS APPLY. NO VIABLE COMMISSION FREE ETF AVAILABLE FROM  BROKER
Schwab Commission Free
Equity Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
US Equities SCHB 10.13 10.82 15.09 Invested
International Equities SCHF 9.66 13.9 10.58
Cash SCHO 0.09 0.13 0.19
Credit Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
High Yield Bond PHB 1.64 3.67 7.8 Invested
Interm Credit Bond SCHZ -0.72 -0.4 2.34
Cash SCHO 0.09 0.13 0.19
Real-Estate Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Equity REIT RWO 6.82 8.1 17.47
Mortgage REIT** REM 10.58 10.58 22.46 Invested
Cash SCHO 0.09 0.13 0.19
Economic Stress Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Gold SGOL -2.99 3.36 -4.8
Long-term Treasuries TLO -4.59 -5.18 3.14 Invested
Cash SCHO 0.09 0.13 0.19
**COMMISSIONS APPLY. NO VIABLE COMMISSION FREE ETF AVAILABLE FROM  BROKER
Fidelity Commission Free
Equity Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
US Equities IWV 10.21 10.83 14.96 Invested
International Equities ACWX 8.69 11.55 7.9
Cash** SHY 0.09 0.14 0.3
Credit Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
High Yield Bond HYG 2.89 4.45 8.8 Invested
Interm Credit Bond LQD -1.11 1.08 6.38
Cash** SHY 0.09 0.14 0.3
Real-Estate Risk Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Equity REIT IYR 7.77 6.82 14.43
Mortgage REIT** REM 10.58 10.58 22.46 Invested
Cash** SHY 0.09 0.14 0.3
Economic Stress Representative ETF Quarterly % Returns Half Year % Returns 1 Year % Returns Signal (based on 1 year returns)
Gold** GLD -2.96 3.38 -4.79
Long-term Treasuries** TLT -4.94 -5.93 3.2 Invested
Cash** SHY 0.09 0.14 0.3
**COMMISSIONS APPLY. NO VIABLE COMMISSION FREE ETF AVAILABLE FROM  BROKER
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23 thoughts on “Dual ETF Momentum Tool (New!)

  1. Could you possibly explain the ETF pairs and how you would go about investing.
    You have put forward 4 pairs – Equity/ Credit Risk/ RealEstate Risk/ Economic Stress.
    Should one buy one holding in each pair? i.e. would the current holdings be VTI, HYG REM and TLT? Or, is each pair just meant to be an alternative to the others?

  2. Your earlier work used 6 month returns, but it seems you’ve now switched to 12 month returns. Why? Also, have you considered combining the two (e.g. use the sum of 6 and 12 month returns as the metric)? You could even add in the 3 month returns. You’re then getting close to what Fund-X has been doing fairly successfully (except for the last few years!). As you said, this method works best when comparing two asset classes that have low correlation, rather than trying to make fine distinctions between highly correlated asset classes such as large vs small cap equities.

    • I used the 12 month returns on the spreadsheet since Antonacci focuses on 12 month momentum in his paper. The objective was to stay as true to the focus of that paper as possible; however, my backtests also showed strong returns for 6 month momentum

  3. Why did you decide to use 12 month total return instead of the 1, 3 or 6 month returns since you reevaluate monthly you could use any of these returns? The 1 month return would probably result in too many switches but the 3 or 6 month returns might catch the trend sooner and be safer and possibly more rewarding.

  4. The original article by Antonacci has a table comparing 3, 6, 9 and 12 month returns and it looks to me that the 12 month returns produce the best returns but the 6 month returns are close with a slightly smaller drawdown.

    • Antonacci found 6 month momentum had similar results to 12 month. I used the 12 month returns on the spreadsheet since he focuses on 12 month momentum in his paper. I did think about averaging 6 and 12 month returns to create a signal, perhaps I will add that in the future.

  5. The first few articles lay it out pretty well, the strategy as tested by Optimal Momentum invested in the top ETF in each pair, so four total simultaneously.

  6. Pingback: Dual ETF Momentum Portfolio – July Update

  7. Hi .. Could you possibly update your charts / performance tables to include from the moment you launched this tool? I don’t think it has been doing very well recently.

  8. Hi is there any way you could attach a live chart to the spreadsheet signals so we can see how this formula has performed over this year?

    • I have not quite cracked the code for doing that in Google Docs. It would be a nice feature, until I can figure something out I will have to periodically backtest the strategy. I will provide a backtest in this month’s update.

  9. Is there a reason that you did not include international real estate such as VNQI in your real estate portfolio? And would you consider adding an international bond fund in the bond portfolio such as BWX?

    • The objective of the portfolio tool was to track the strategy as originally structured/tested by Gary Antonacci, and I have not tracked any additional funds. However, that is not to suggest they don’t have a merit.

    • 2013 was not particularly impressive on a total return basis, although volatility and drawdowns have remained relatively low.

  10. Further thinking about this portfolio suggests to me that the real estate portion should not be used if you own your own home.

  11. Pingback: Dual Momentum ETF Portfolio |

  12. Pingback: Dual Momentum ETF Portfolio For August - True Investment Research

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