Proprietary Models

We designed our public dual momentum model, GEM, to be simple and easy to use by do-it-yourself investors. GEM introduced dual momentum to the world.

The aim of our proprietary models is to achieve the most consistent returns possible using all available momentum tools. We license our proprietary model signals to substantial private investors and a few select advisors who use them to manage public accounts.

Proprietary models strive to be highly adaptive to market conditions and can serve as the basis for core portfolios. They have their foundation in academic research supported by out-of-sample testing and real-time validation. Here are our most popular proprietary models:

Enhanced Global Balanced Momentum (E-GBM)

E-GBM is a balanced allocation between stocks, bonds, and other assets. It is a general-purpose model suitable for most investors. At the end of 2021, we merged E-GBM with our Enhanced Global Equities Momentum (E-GEM) model. 

Dual Momentum Fixed Income (DMFI)

Dual momentum works well with fixed income. DMFI applies dual momentum only to the bond market. More conservative investors use DMFI on its own or combine it with other dual momentum models.

Advanced Global Equities Momentum (A-GEM)

A-GEM, includes stocks, bonds, and other assets. A-GEM incorporates daily, weekly, and monthly data. 

NASDAQ Breadth and Trend (QBAT)

QBAT applies breadth, trend, and mean reversion to the ProShares Ultra QQQ ETF (QLD). QBAT’s most important component is breadth. When not invested in QLD, QBAT invests in the same ETFs as A-GEM using dual momentum.

QBAT is our most complete model. Since QBAT uses only daily data, it is also our most responsive model.

Performance

Here is the performance of our Enhanced Global Balanced Momentum (E-GBM) model compared with our public GEM model, a 60/40% balanced stock/bond portfolio, and the S&P 500 index. January 1970 is the starting date since that is as far back as reliable data goes for some assets.

E-GBM Model Performance Jan 1970 through Oct 2022

	E-GBM	GEM	S&P 500	60/40
CAGR	18.0	15.3	10.5	9.2
Standard Deviation	10.7	12.6	15.4	10.0
Sharpe Ratio	1.22	0.87	0.45	0.51
Worst Drawdown	-10.0	-19.6	-51.0	-29.7
Average Drawdown	-1.3	-3.0	-7.5	-3.2
% Up Months	75	68	63	63

Historical data and analysis should not be taken as an indication or guarantee of future performance. We have subtracted estimated transaction fees, slippage, and fund management fees. Performance does not represent actual fund or portfolio performance. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. Balanced is 60% S&P 500 Index and 40% ICE U.S. Treasury 7-10 Year Bond Index. Worst drawdown is on a cumulative month-end basis. Ulcer Index measures the depth and duration of drawdowns from earlier highs. Please see the Disclaimer page for additional information.

Here are the back-tested results of A-GEM compared to the S&P 500, a 70/30% balanced stock/bond portfolio, Enhanced Global Balanced Momentum (E-GBM), and a 50/50% blend of A-GEM and E-GEM. Results begin in January 1999 when there was enough ETF daily data. We have extended ETF data with associated index data. 

A-GEM Model Performance Jan 1999 through Oct 2022

	S&P 500	BALANCED	GEM	E-GBM	A-GEM	50/50
CAGR	6.8	6.3	9.4	14.3	17.6	16.2
STD DEV	15.9	11.7	11.9	10.2	10.9	9.7
SHARPE	0.49	0.57	0.81	1.36	1.54	1.60
MAX DD	-51.3	-38.1	-19.6	-9.2	-11.7	-8.4
AVG DD	-10.5	-5.4	-4.4	-1.6	-1.6	-1.3
% UP MOS	64	63	67	70	72	70

Historical data and analysis should not be taken as an indication or guarantee of future performance. We have subtracted transaction slippage of 0.1% per trade. Performance does not represent actual fund or portfolio performance. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. Balanced is 70% S&P 500 Index and 30% ICE U.S. Treasury 7-10 Year Bond Index. Worst drawdown is on a cumulative month-end basis. Ulcer Index measures the depth and duration of drawdowns from earlier highs. Please see the Disclaimer page for more information.

Here are the back-tested results of QBAT compared to QQQ, the S&P 500, Global Equities Momentum (GEM), Enhanced Global Balanced Momentum (E-GBM), and Advanced Global Equities (A-GEM). We also show 50%/30%/20% and 50%/40%/10% allocations to E-GBM, A-GEM, and QBAT. For a comparison without QBAT, we show a 50%/50% allocation to only E-GBM and A-GEM.  

A 20% QBAT allocation more than doubles the expected return of an evenly allocated A-GEM and E-GBM portfolio while keeping volatility at a reasonable level.  Even a 10% allocation to QBAT has a meaningful impact on expected performance.

QBAT Model Performance August 2006 through October 2022

	QQQ	S&P500	GEM	E-GBM	A-GEM	QBAT	50/30/20	50/40/10	50/50
CAGR	13.7	9.1	7.6	11.5	15.7	42.1	29.6	25.1	13.9
STD DEV	19.4	16.6	12.5	8.9	11.0	25.1	11.3	10.1	9.2
SHARPE	0.77	0.59	0.65	1.27	1.38	1.55	1.59	1.55	1.45
MAX DD	-50.2	-51.3	-19.6	-8.1	-11.7	-27.7	-15.9	-12.4	-8.3
AVG DD	-6.7	-7.1	-5.3	-1.6	-1.7	-3.1	-2.1	-1.7	-1.4
% UP MOS	66	68	66	68	70	67	66	67	66

Portfolio Effect

Our models do best when used in combination because of their strategy differences and modest correlations. Here are the monthly correlations from August 2006. 

	QBAT	A-GEM	EGBM	S&P500	QQQ
QBAT	1.00	0.76	0.59	0.51	0.62
A-GEM		1.00	0.68	0.46	0.46
E-GBM			1.00	0.48	0.49
S&P500				1.00	0.92

Fact sheets are available on all our proprietary models. Contact us for more information.

Results are not a guarantee of future success and do not represent returns that any investor actually attained. Performance includes reinvestment of interest and dividends. CAGR is the compound annual growth rate. BALANCED is 70% S&P 500 Index and 30% ICE U.S. Treasury 7-10-Year Bond Index. Maximum drawdown is on a cumulative month-end basis. Ulcer Index measures the depth and duration of drawdowns from earlier highs. Leveraged ETFs have high risk and extreme volatility. Please see our Disclaimer page for more information.