We continue our discussion from last week on the topic of mean reversion, this time through the lens of the MSCI Barra US Total Market Equity Trading Model.

Before we do that though, we wanted to revisit our analysis on Antero Midstream, our mean reversion pick from last week. As you can see below, Antero has seen a fairly strong selloff MTD, and has now fallen from a +3.5 exposure (top 1%) to a +0.44 (66th percentile) exposure in the Axioma Short-Term Momentum factor. Certainly a strong case of reversion!

With the markets continuing to shrug off negative unemployment news and health uncertainty of re-opening this month, we wanted to take this opportunity to introduce the family of mean reversion factors. Many of you are feeling tense about the recent rally, and are possibly looking to take defensive actions. Mean reversion factors can help highlight companies who’s recent returns (positive and negative) are at the extremes of the entire market. Coupled with fundamental analysis, these factors can be used as indicators to help better time investment decisions.

As we enter into Q2 2020 earnings season, we wanted to revisit the Hedge Fund Concentration topic and highlight key crowded names across the major US sectors.

As a reminder, we shared a 2019 paper that posited that the level of concentration has been consistently on the rise, stemming from three key reasons:

We made it through another week! Hope you and yours remain healthy and safe. Today, we’ll discuss the how the dramatic plunge in oil prices has precipitated a unique opportunity in the XLE. We’ll also provide our weekly market and factor updates.

For those who missed last week’s Factor Spotlight, my name is Chris Martin, Product Manager at Omega Point, with a follow-up post on Exchange Rate Sensitivity. If you did miss it, last week’s post is a potentially helpful primer for this week’s edition. All of us at Omega Point hope that you and your families remain healthy and safe as we collectively ride this out.