The investment objective of this portfolio is to provide higher risk adjusted returns, and growth with lower volatility.
The equity universe is selected based on extensive fundamentals research over the years and is primarily focused on US Large cap high quality growth and value stocks. Currently there are 100 equities across all major sectors.
The trading strategy is Equal weight and the top 30 stocks in this universe are picked using a bi-factor model that blends Daily Sentiment and Sentiment Momentum (Change in sentiment over the 50-day moving average). The rebalancing is weekly and the portfolio ensures that sector / industry overweighting does not occur.
- The portfolio also uses a hedging strategy to guard against major drawdown in the stock market.
- The portfolio uses quantitative modeling leveraging the alpha generating ability of AI Sentiment. Advanced Natural Language and Machine Learning algorithms transform unstructured textual data to quantified real-time sentiment signal using news articles from established sources and asserts the sentiment of each financially “oriented” sentence within an article.
- These snippet level assertions are aggregated at the ticker level and is a measure of investor sentiment. Removal or reduction of a position in the portfolio is considered when any of the selection criteria deteriorates.
The US Large Cap Sentiment Portfolio significantly outperformed the S&P 500 performance for the period July 3, 2017 – Jan 31, 2022 by applying the sentiment signals to rebalance the 30 stock portfolio. The cumulative portfolio return for the period was 164.74% vs the S&P 500 cumulative return of 101.93 %. The volatility of the portfolio was lower than the S&P 500 with a beta of 0.85 and a Sharpe Ratio of 1.17.