iQ Risk On / Risk Off High Yield Stock Model
Targets a higher current yield than domestic corporate high yield (junk) bond indices
15.59% max draw-down
7% downside capture ratio
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The iQUANT.pro Risk On / Risk Off High Yield Stock Model utilizes four non-correlated factors to determine an allocation between all cap high-yield stocks (Risk On) and long-term Treasury bonds (Risk Off).
PERHAPS THE MOST CUTTING-EDGE HIGH-YIELD STOCK MODEL YOU’VE SEEN
The iQUANT.pro Risk On / Risk Off High-Yield Stock Model is a “first of”…
The Model utilizes the following four non-correlated factors to determine its allocation to stocks and/or bonds:
Technical (month-end price to 9-month moving average of Wilshire 5000 Index)
Macro (Yield Curve)
Valuation (S&P 500 Price-to-Earnings Ratio)
Seasonal (Sell in May but stay based on mid-cap ETF Money Flow Index)
HOW DOES THE MODEL WORK?
Each of the aforementioned factors account for 25% of the Model’s allocation. If all four of the factors are “risk on”, then 100% of the Model is allocated to stocks. If 2 of the 4 indicators are “risk on”, then 50% of the Model allocates to stocks while the other 50% allocates to long-term United States Treasury bonds.
THE “risk on” STOCK SCREEN
When the Model allocates to stocks, it utilizes the following (monthly) all-cap high-yield screen:
Start with the largest 2,000 domestically-traded stocks (as measured by the prior month-end market capitalization)
Sort by Dividend Yield and select the top 60 stocks
Sort the remaining 60 stocks by 12-month less 1-month price momentum and select the top 40 stocks
Sort the remaining 40 stocks by 3-year seasonal monthly price momentum and select the top 10 stocks.
The Model re-balances monthly