SciVest Price Momentum Strategy
The primary objective of the SciVest Price Momentum Canada Portfolio is to deliver capital appreciation which in the long-term exceeds that of the S&P/TSX Composite Index. The SciVest Price Momentum Canada Portfolio is also expected to provide diversification relative to capitalization weighting indexes including the S&P/TSX Composite Index.
Price Momentum is a relative strength concept – that is, price momentum assumes that, in the medium term (6-18 months), stocks that have been outperforming will continue to outperform, and stocks that have been underperforming will continue to underperform. Price Momentum has been widely studied within the academic and quantitative investment practitioner communities, with 100’s of peer reviewed, scientific journal articles published since Price Momentum was first documented in 1993. These peer reviewed articles show that Price Momentum is one of the most powerful predictors of future individual stock returns ever discovered.
The SciVest Price Momentum Canada Strategy is a systematic, rules-based, equity strategy that invests in Canadian-listed stocks, which meet a number of liquidity and risk management constraints, that are selected using the SciVest Price Momentum Factor. The SciVest Price Momentum Factor is designed to capture both the magnitude and the quality of each stock’s price momentum. It is a weighted average of 3 price momentum concepts: (i) trailing medium-term stock returns (40%); (ii) current stock price relative to the stock’s 52-week high (35%); and (iii) the consistency and uniformity of the stock’s 52-week price trend (25%). The SciVest Price Momentum Canada Portfolio is rebalanced and reconstituted monthly moving towards the then current highest ranked SciVest Price Momentum Factor stocks, on an equal-weighted basis, while still abiding by turn-over, liquidity, and risk management constraints. These constraints include strict maximum exposures to sectors, sub-sectors, industries and sub-industries so that Portfolio is always well diversified across numerous segments of the economy. As a result, the SciVest Price Momentum Canada Portfolio is typically a diversified collection of stocks reflecting the most popular, most interesting and/or fastest growing companies within the current economic environment.