Exploit style momentum - Track the style leaders

 

There is momentum in stocks as well as in other asset classes. There is also momentum in factor styles. Using a simple momentum model with an optimizer that goes long the high momentum styles and short the low momentum styles and accounts for the variance/covariance matrix generates an IR well above a simple strategy of rank ordering by performance. See "Can Style Momentum be Optimized". Momentum is everywhere; however, if you account for risk you can improve the return to risk profile for a momentum-based portfolio.

Using an optimizer will add significantly to the IR relative to a simple long/short strategy. In many cases, the IR is doubled.  

The factor contributions tell us something about the return potential and uniqueness of different factors. Beta and liquidity do not add any to performance but something like industry momentum and a ML factor are strong contributors.

Simple common approaches such as momentum and accounting for the variance/covariance matrix can go a long way for providing good risk-adjusted returns.