@praveen_potnuru I calculate momentum on 6 months and 1 year returns.
Volatility is measured as the Standard Deviation (SD) of the daily returns.
The process I follow is in 6 steps as given below.
a. Calculate the returns on point to point.
b. Calculate the Standard Deviation (SD) of the daily returns.
c. Calculate a factor called momentum ratio which is returns / SD.
d. After that calculate Z-score which is (Momentum ratio – Mean of Momentum ratio of universe)/Standard deviation of Universe.
Complete these steps for 1 year and 6 months look back period.
e. Do the weighting of the Z-score value. I have used equal weightage of 0.5 and 0.5 for 1 year and 6 months respectively. People could choose to give higher weightage to the 6 months Z-score and lower weightage to the 1 year Z-score.
f. I then rank the stocks based on the resultant number.
| Subscribe To Our Free Newsletter |
