Looking to invest in ETF THEME? Consider it, because it showed marginal outperformance

Exchange Traded Funds showed marginal outperformance on Friday. It fell by -0.44% to close at 1220.11. On a day when the overall market breadth was 71%, it closed higher than 41% of the market. In comparison, the benchmark NIFTY-50 index closed today at +0.02%.

[Theme constituents]

~ETF showed a bullish trend over the last 3 months. During this period ~ETF increased by +8.15% . There was a long signal during this period which returned +7.64%.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

~ETF has been outperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 15 Nov, 2016 to 28 Aug, 2018. Over the last 3 years and 14 days, ~ETF underperformed the NIFTY-50 index on 48% days. Which indicates that on days ~ETF underperforms the NIFTY-50 index, it's performance is marginally worse than on the days it outperforms the NIFTY-50 index.

During the last three months ~ETF was mostly profitable and delivered on average +0.13% per day. It's best return during this period (of +1.78%) was on Monday, 29 Oct, 2018. While it's worst loss in the same period (of -1.13%) was on Tuesday, 23 Oct, 2018. The longest stort-term trend during this period was 8 profitable days, which started on 11 Dec, 2018 and went on till 20 Dec, 2018. This bullish trend returned +4.37% to investors.

During the last year ~ETF had 9 profitable months and 3 loss making months. ~ETF returned profits in more months than NIFTY-50 index. ~ETF was also a less risky investment than NIFTY-50 index as it's worst month in the last year, Sep 2018, returned -5.92% compared to -6.42% returned by NIFTY-50 index in Sep 2018. ~ETF had a longer winning streak of profitable months than NIFTY-50 index. It went up in 5 straight months (from Apr 2018 to Aug 2018) during which period it delivered +9.38%. It is interesting to note that both ~ETF and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

If you totally want to reduce risk, take no risk. Bury the money. Then you've got no risk at all.
-- Don Connelly

~ETF is currently seeing overall fall in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in ~ETF's volatility from 29 Oct, 2018 to 15 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that ~ETF has significant positive skewness in it's return distribution. This indicates that investors can expect ~ETF to recover from drawdowns quickly. Which makes ~ETF a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

NIFTY-50 index has more chance of extreme outcomes than ~ETF. Therefore, NIFTY-50 must receive a lower allocation than ~ETF in your portfolio. ~ETF usually has shorter drawdown period than the NIFTY-50 index.

Based on your interest in ~ETF you may find it interesting to know that NIFTY50-DIV-POINT is highly volatile and investors investing in it must take extreme caution. Consider either reducing your exposure to NIFTY50-DIV-POINT or sufficiently diversifying your portfolio.