YPA-FINANCE

Ypa Finance                                  

Portfolios for Active Investors

     Free Articles    |    Newsletters    |    Global Household Index    |    VIX Trading    |    Books    |     Methodology     
 

YpaFi Global Household Index  

The YpaFi Global Household Index is a large capitalization, low volatility index based on a systematic ranking. It holds 20 S&P 500 stocks in equal weight: 10 in the Consumer Staples sector, 10 in the Healthcare sector. It is rebalanced every 4 weeks and dividends are reinvested in shares.

globalhouseholdindex

Global Household Index (red) compared to the S&P 500 index with dividends (blue).

The next table and chart compare the Global Household Index to SPY (SPDR S&P 500 ETF) and to an equal weight mix of XLP and XLV rebalanced every 4 weeks (Consumer Staples and Healthcare ETFs). The next paragraph gives more information on the strategy.

1/1/1999-6/16/2014 Ann. Return Volatility Max Ddown Sharpe  Sortino Correlation/SPY
SPY 4.83% 20.20% 55.40% 0.04 0.06 1
XLP+XLV 6.52% 16.45% 35.94% 0.15 0.2 0.48
Global Household Ind. 19.85% 15.84% 27.00% 1 1.33 0.65

global household index

Investing in predictable trends:

Our aim was to build a defensive index. The Consumer Staples and Healthcare sectors are considered defensive because they are more resistant in market downturns. Utilities, and sometimes Materials, are also considered defensive sectors. In reality, they are much more volatile and dependent of industrial production. That is why we have excluded them. Companies selling products and services that are needed every day by a wide part of the population are less sensitive to economic conditions. Moreover, large companies of the S&P 500 index are global and provide exposure to worldwide consumers. In the U.S.A. and other developed countries, the baby-boomers generation is the highest purchasing power and its needs in health/personal/household products and services will still increase. In developing countries, a global middle class is surging with new needs and new consumption habits. The population structure makes this two trends reasonably predictable for the next two decades. 

Methodology:

Most publications consider fundamental factors the same way for all sectors. In reality, fundamental factors don’t have the same significance for all industries and all business models. YpaFi Mini-Indexes rank the S&P 500 companies in each sector according to fundamental ratios that are statistically the most relevant in this sector. These ratios are a quantitative view on valuation, growth and financial strength. A maximum of 3 ratios are taken into account for each sector. As a consequence, each company has 1 to 3 scores depending on its sector. Then, a weighted sum of these scores is used to calculate a final score. Eventually, the 10 companies of highest score in each sector are selected in equal weight to make the sector Mini-Indexes. They are rebalanced every 4 weeks. 
This methodology is reproducible, systematic, quantitative and simple. There is no complicated formula and a maximum of 3 basic ratios are needed for each sector. It is based exclusively on fundamental data. Price action is ignored and there is no market timing in the model. Mini-Indexes can be used to build systematic portfolios, or as a short-list of companies for in-depth analysis.

The YpaFi Global Household Index has been designed as a tool for professionals, fund managers, family offices, ETF sponsors. Our Newsletters are a better solution for individual investors.
More info: ypa.finance@gmail.com

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN


Disclaimer and Contact





Seeking Alpha Certified