Style Allocation & Performance

There are 12 Style Comparative Performance Charts. All of these charts operate in the same manner as the one to the left.

This one is based on Domestic Investments which are represented by a Large-Cap Exchange Traded Fund (ETF) and a Mid-Cap ETF. Since the Large-Cap ETF is listed first, this means that the final calculations are using the Large-Cap Data as the numerator (the top number of a fraction), and the Mid-Cap ETF Data is being used as the denominator (the bottom number of a fraction).

This relationship needs to be understood to make sense of what the chart is indicating.  When the numerator is divided by the denominator, the resulting indicator is what I call the Style Factor Index (SFI). When the SFI is rising, this indicates that the first Investment listed is performing better than the second investment listed. In the case on the left, Large-Cap Equities should by outperforming Mid-Cap Equities.

Therefore, you may want to overweight Large-Cap Equities and underweight Midcap Equities, in your portfolio, during a time when the trend line is rising. The opposite is true the SFI is falling.

The Blue Line represents the Style Factor Index (SFI), the Red Line is a short-term moving average, and the Yellow Line is a longer-term moving average.  Each time one line crosses another it represents a key time frame which might help to confirm a change in the direction of the SFI.