Climate Change THEME

1072.06 -4.34 (-0.4%) Sell

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CLIMATE THEME is a falling knife, continues to bleed every investor trying to catch it

14 min read

Climate Change has destroyed investor wealth on Tuesday. It delivered -0.4% to close at 1072.06. On a day when the overall market breadth was 34%, it closed higher than 69% of the market. In comparison, the benchmark SP500 index closed today at +0.01%.

[Theme constituents]

Buy-and-Hold investors in ~CLIMATE experienced a maximum drawdown of -17.53% over the last three months. It delivered -14.76% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +10.56%.

Trend

~CLIMATE has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 14 Mar, 2017 to 6 Nov, 2017. Over the last 2 years 11 months and 14 days, ~CLIMATE underperformed the SP500 index on 49% days. Which indicates that on days ~CLIMATE underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months ~CLIMATE was mostly loss making and delivered on average -0.24% per day. It's best return during this period (of +2.91%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -3.48%) was on Monday, 17 Dec, 2018. The longest stort-term trend during this period was 7 profitable days, which started on 30 Oct, 2018 and went on till 7 Nov, 2018. This bullish trend returned +12.24% to investors.

The last 12 months saw ~CLIMATE's investors making profits in 6 months and incurring losses in 6 months. ~CLIMATE was less consistent in delivering monthly returs than SP500 index. ~CLIMATE was also a more risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -10.67% compared to -7.75% returned by SP500 index in Dec 2018. ~CLIMATE had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year.

There is nothing wrong with changing a plan when the situation has changed.
-- Seneca

~CLIMATE is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in ~CLIMATE's volatility from 19 Sep, 2018 to 30 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

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

~CLIMATE has more chance of extreme outcomes than the SP500 index. Therefore, ~CLIMATE must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ~CLIMATE.

Based on your interest in ~CLIMATE you may find it interesting to know that VIPS and IMTE are highly volatile and therefore risky. Investors should consider limiting their exposure to these instruments (because of their volatile nature).

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