8 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?

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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.

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   • 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

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     • That’s good news. A strategy that’s robust to reasonable parameter changes inspires more confidence going forward.

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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.

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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.

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   • 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.

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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.

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