Strategy Library

Asset Class Momentum

Introduction

This trend following algorithm finds its entry points using the momentum effect. The momentum anomaly says that what was strongly going up in the past will probably continue to go up in the near future.  The calculation performed uses the rate of change in price movements for a particular asset.

Method

The portfolio of this algorithm contains 5 ETFs in different asset classes. LEAN has the momentum indicator MOM(symbol, period). The period is 12 months. After obtaining the most recent momentum value, we pick 3 ETFs with the strongest 12-month momentum into the portfolio and weight them equally. Hold for 1 month and then rebalance the portfolio with new momentum. Unlike asset class trend following strategy which combines asset classes into one portfolio, this rotational momentum system compares the performance of asset classes and picks only the best-performing assets from investment universe into investor's portfolio. The portfolio is rebalanced every month and portfolio's holdings are rotated so that only the best-performing assets are held.

Algorithm

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