We Identified Stocks We Thought Would Do Well and Bad with Rising Inflation, Here Is How They Are Doing So Far.

Posted on2021-10-182021-10-18AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

As many of us might know, inflation has been on the rise. According to the Bureau of Labor Statistics, the annual inflation as of September 2021 is 5.4 percent. In our previous blog post published on April 19, 2021, we identified 10 Nasdaq-100 stocks that we expected to do well with rising inflation and 10 Nasdaq-100 stocks that would not do well in such an environment. Using the MacroRisk Analytics® platform, we look at the performance of these stocks and compare them to how the Nasdaq-100 index as a whole has fared so far. In addition, we identify another two sets of 10 Nasdaq-100 stocks that we expect to do well and not do well if inflation rises. Financial advisors and investors need to be aware of how inflation might impact their portfolios and assets.

To perform the comparison, using the MacroRisk Analytics portfolios tool, I created an equally weighted portfolio of 10 stocks that were expected to respond positively to rising inflation (blue line in the chart below) and an equally weighted portfolio of 10 stocks that were expected to respond negatively (pink line). Then I compared these two portfolios to the performance of the Nasdaq-100 Index (green line) using the MacroRisk Analytics performance report. The chart below shows this performance from April 13 through October 13, 2021, a six-month period. (The starting date is April 13, 2021, because data as of this date were initially used in the previous blog post to identify the two sets of 10 stocks.)

As can be seen, the portfolio of 10 stocks that we expected to do well in a rising inflation environment (blue line) did indeed do better than the Nasdaq-100 Index (green line) and the portfolio of 10 stocks that we expected to do worse in such an environment (pink line). The performance of the latter portfolio (pink line) and the Nasdaq-100 Index was somewhat similar over the six-month time period.

The table below shows the return and risk characteristics of the two portfolios and the index. The “top 10 inflation” portfolio also had lower risk than the index as represented by the standard deviation and the lower semideviation statistics, a good feat considering this portfolio consists of only 10 stocks while the index has 102 stocks.

So far, we have identified how the stocks we selected six months ago have performed through the present day. Next, I use the MacroRisk Analytics screening tool to identify new sets of stocks that we expect to do well and not well if inflation rises.

The table below shows 10 stocks out of the Nasdaq-100 Index that we expect to have the largest positive response to inflation as a proportion of total economic risk as of October 13, 2021.

The third column represents the proportion of total economic risk that inflation represents for an asset. The higher the number, the more significant the expected effect of inflation changes are on an asset’s stock price versus the other 17 economic factors in the MacroRisk Analytics model.

The fourth column represents the expected percentage change in a stock’s price given a one standard deviation increase in inflation.

The table below shows 10 stocks out of the Nasdaq-100 Index that we expect to have the largest negative response to inflation as a proportion of total economic risk as of October 13, 2021.

In summary, this post analyzed the performances of two sets of stocks, identified in our previous blog post, that we expected to do well and not so well in a rising inflation environment. We then identified new sets of stocks using the most recent available data. Inflation is only part of the total economic risk, and other economic risks can have a big impact on the performances of individual stocks and portfolios. MacroRisk Analytics provides the proprietary and patented tools to help you measure these economic risks.

This post is possible thanks to MacroRisk Analytics®. This platform provides investment research for 30,000+ individual names as well as investor portfolios. The MacroRisk Analytics® model uses 18 macroeconomic factors to break down the economy’s impact on investment value. Using this patented research, our team has twice won the William F. Sharpe Indexing Achievement Award for ETF/Indexing Paper of the Year. Click here to access this award-winning investment research today! You can find our other blog posts by going to www.macrorisk.com.

Top 10 Nasdaq Stocks with Largest Relative Exposures to Inflation – April 13, 2021 Update

Posted on2021-04-192021-04-19AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

This post provides 10 stocks out of the Nasdaq-100 Index that investors can expect to benefit from a rise in inflation and 10 stocks that are expected to be negatively impacted by a rise in inflation. Financial advisors and investors need to be aware of how inflation is likely to impact their holdings and portfolios. We performed the analysis using the MacroRisk Analytics® platform as of April 13, 2021.

The Eta® profile by MacroRisk Analytics demonstrates an asset’s historical exposures to 18 economic factors in the MacroRisk Analytics model. CPI, or inflation, is one of these factors. If an asset has a positive exposure to inflation, we can expect it to benefit from a rise in inflation.

The MacroRisk Analytics platform makes it easy to identify stocks that have positive or negative exposures to inflation or any other factor in its model. Mondelez International (ticker: MDLZ) is one such company. According to its Eta profile shown below as of April 13, 2021, it has a large positive exposure to CPI as a proportion of its total economic risk (i.e., other economic exposures in the graph below). The MacroRisk Analytics model predicts the company’s stock price might increase approximately 27% with a one standard deviation increase in inflation, keeping other factors constant.

We used the MacroRisk Analytics screening tool to identify 10 stocks out of the Nasdaq-100 Index that one can expect to have the largest positive exposures to inflation as a proportion of total economic risk. Here are the results using data as of April 13, 2021.

The fourth column represents the expected percentage change in a stock’s price given a one standard deviation increase in inflation.

Investors can expect Mondelez International (ticker: MDLZ) to have the largest positive inflation exposure as a percentage of its total economic risk (19.1%). If inflation increases one standard deviation, the stock’s price is expected to increase by about 27%, keeping other factors constant. The company operates in the confectioners’ industry and is one of the world’s largest snack companies with famous brands such as Chips Ahoy!, Ritz, Oreo, and others.

During the past 10 years, Mondelez International has enjoyed a positive exposure to inflation as demonstrated by the heat map shown below. Red represents positive and blue represents negative exposure to an economic factor.

Intuitively, this predicted positive response to inflation makes sense given that raw material costs are a small percentage of total operating costs, their businesses are not particularly labor intensive, yet, within their markets, they enjoy pricing power that allows them to raise their product prices in response to a surge in inflation.

The table below shows 10 stocks out of the Nasdaq-100 Index that are expected to have the largest negative response to inflation as a proportion of total economic risk as of April 13, 2021.

Micron Technology (ticker: MU) has inflation risk that represents 15.8% of its total economic risk. If inflation rises by one standard deviation, the stock’s price is expected to drop by approximately 38%, keeping other factors constant. The company operates in the semiconductors industry and provides memory and storage microchips.

Over the past ten years, Micron Technology’s response to inflation has varied. From May 2011 through approximately February 2018, it had a detrimental exposure to inflation (blue markings for the CPI factor) followed by a positive exposure (red markings) until about May 2020 and has recently reverted back to having a negative exposure to inflation.

Intuitively, this makes sense given that all but Kraft Heinz are technology companies where the sale price of their products are usually set by long term contracts, thus providing little short term pricing power when inflation surges.

This post presented stocks out of the Nasdaq-100 Index that have the largest positive and negative exposures to inflation risk. Given the recent expansionary fiscal and monetary policies, a rise in inflation is a possibility. Thus, it is essential to identify assets that one can expect to benefit from or be negatively impacted by an inflation rise. This identification allows one to adjust one’s portfolio appropriately.

Edited by Bob Hanisee and Rania Sullivan.

5 Nasdaq Stocks with Most and Least Economic Exposure to Oil

Posted on2020-07-242020-07-24AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

The global COVID-19 pandemic and disagreements between Russia and Saudi Arabia caused a one-two punch to the oil prices back in March of 2020. This has created a glut in the oil Market creating disarray amongst OPEC leaders and investors with the futures prices turning negative in April of 2020 for the first time in history. As the economies around the world began to reopen and the OPEC members agreed oil supply cuts, the oil market stabilized with prices continuing to recover.

The MacroRisk Analytics® platform can assist financial advisors in identifying proxy investments, based on economic interactions, that are expected to behave similar to or opposite to oil investments without investing in oil investments themselves (e.g., possibly due to ESG limitations). The proprietary and patented analysis by MacroRisk Analytics allows such an endeavor.

Using the MacroRisk Analytics platform, this post will identify 5 stocks out of the Nasdaq 100 Index that are expected to behave similar to SPDR S&P Oil & Gas Explore & Production ETF (ticker: XOP) and 5 stocks that are expected to behave in an opposite direction.

XOP is an ETF that tracks the performance of oil and gas production and exploration public companies. Using the XOP as a benchmark investment in oil, MacroRisk Analytics can identify potential investments that have similar or different economic exposures to XOP. The Eta® profile, by MacroRisk Analytics, demonstrates these economic exposures. The Eta profile of XOP is shown below:

If a bar is pointing up, the XOP price is expected to increase if that factor increases and vice versa. The magnitudes of the bars also show us the importance of the factors.

To identify our 5 Nasdaq stocks that are expected to behave like XOP, the MacroRisk Analytics platform would look for stocks with similar or opposite Eta profiles to that of XOP. It is very rare to find assets that have the same or opposite Eta profiles exactly but MacroRisk will select investments that are the closest to achieving the specific goal.

Some financial advisors may believe that the oil market would continue its rebound as the economies continue to reopen driving the demand for oil up and the OPEC countries not planning to increase supply. These factors are expected to apply upward pressure to oil prices.

To this end, below are 5 stocks out of the Nasdaq 100 Index that are expected to behave as similar as possible to XOP ETF as of July 19, 2020 using the Eta® tracking error.

On the other hand, other advisors may believe that with the rise of Covid-19 cases in the United States, some states may take steps to slow or implement some economic shutdowns again. This is expected to decrease the demand for oil as economic activity decreases.

To this end, below are 5 stocks out of the Nasdaq 100 Index that are expected to behave as different as possible to XOP ETF as of July 19, 2020 using the Eta® tracking error.

The Investment Ideas Generator by MacroRisk Analytics was used to identify stocks mentioned in this blog post. This tool provides a unique way for financial advisors to find proxy investments out of a buylist (as we just did for oil using Nasdaq 100 stocks) because some advisors may not even be able to take a position in oil-related stocks due to ESG limitations, for example.

Whether you are interested in analyzing oil investments as stand-alone assets or in a portfolio setting and with the economy in mind, MacroRisk Analytics can assist with this as well many other investment analyses. MacroRisk Analytics provides analysis for thousands of stocks, mutual funds, ETFs, and other assets. For sign up, visit http://www.macrorisk.com/subscriptions/.

Some of the MacroRisk Analytics® analysis has been utilized by the Rational Equity Armor Fund (ticker: HDCTX) starting in December of 2019. For more information about the fund, click here.

Mr. Rolland Harris assisted with the preparation of this post.

Unemployment is Significant: A List of NASDAQ Stocks Expected to Benefit from Unemployment Changes

Posted on2020-07-152020-07-16AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

The recent economic shutdown has caused the U.S. unemployment rate to skyrocket making it the most significant economic factor since June of 2020 according to the 18-factor MacroRisk Analytics® model. Financial advisors need to pay special attention to the unemployment rate and understand which stocks are expected to benefit from a decrease or an increase in the unemployment rate and potentially adjust the portfolios of their clients accordingly.

Using the MacroRisk Analytics® platform, this post will present 10 NASDAQ-100 Index stocks that are expected to benefit from a decrease in the unemployment rate and 10 NASDAQ-100 Index stocks that are expected to benefit if the unemployment goes up.

The graph below shows the unemployment rate from 1989 through July 14, 2020, and the Covid-related spike in the unemployment is much greater than the one during the 2008-09 market crash. The green bands around the unemployment rate show the expected unemployment range given its recent movement at the time.

Zooming in to year-to-date unemployment rate, we can see just how much above the unemployment rate is compared to the upper bound of the green bands which correspond to the expected range of the unemployment rate based on its recent history (the green bands correspond to two standard deviations around the moving average).

Looking at the MacroRisk’s snapshot below of where the economic factors stand relative to their recent history as of 7/14/2020 clearly shows that the unemployment rate exhibits the most volatility relative to its moving average. The graph below shows how many standard deviations away a factor is from its moving-average. Red factors, such as the unemployment rate, are outside the two standard-deviation range denoted by the dashed lines.

With the unemployment rate factor being so significant in mind, using the MacroRisk Analytics® platform, we present a list of NASDAQ-100 Index stocks that are expected to benefit from a decrease in the unemployment rate and vice versa. These stocks are expected to have the biggest portion of their economic risk correspond to unemployment and where the stocks’ sensitivities to unemployment are negative as denoted by negative signs in the table below (i.e., expected to benefit from a decrease in the unemployment rate).

Name	Symbol	Unemployment as a Proportion of Economic Risk as of 7/14/2020
Amgen Inc	AMGN	-5.1%
Gilead Sciences Inc	GILD	-4.5%
Walgreens Boots Alliance Inc	WBA	-4.4%
Vertex Pharmaceuticals Inc	VRTX	-3.3%
Intuitive Surgical Inc	ISRG	-3.2%
Regeneron Pharmaceuticals Inc	REGN	-3.1%
Biogen Inc	BIIB	-3.0%
Incyte Corp	INCY	-2.6%
Lam Research Corp	LRCX	-2.5%
PACCAR Inc	PCAR	-2.2%

Below is a list of 10 NASDAQ-100 Index stocks that are expected to benefit from an increase in the unemployment rate (i.e., these stocks are expected to have the highest positive sensitivity to the unemployment rate as a percentage of their economic risk).

Name	Symbol	Unemployment as a Proportion of Economic Risk as of 7/14/2020
Facebook Inc	FB	8.4%
eBay Inc	EBAY	5.1%
CoStar Group Inc	CSGP	4.9%
Copart Inc	CPRT	4.7%
Cintas Corp	CTAS	4.4%
Liberty Global plc	LBTYK	4.3%
NXP Semiconductors N.V.	NXPI	4.1%
Adobe Systems Inc	ADBE	4.0%
Liberty Global plc cl A	LBTYA	3.9%
PayPal Holdings Inc	PYPL	3.5%

With the economy opening up, more and more people are expected to return to work which would drive the unemployment down. However, there exists a risk of a second wave of COVID-19 infections which might cause the unemployment to increase if similar shutdown measures are implemented.

You can find the economic exposures (such as the unemployment rate discussed in this post) of thousands of stocks, mutual funds, ETFs, and other assets using The Economy Matters® reports provided by MacroRisk Analytics®.

Some of the MacroRisk Analytics® analysis has been utilized by the Rational Equity Armor Fund (ticker: HDCTX) starting in December of 2019. For more information about the fund, click here.

Mr. Rolland Harris assisted with the preparation of this post.

Hedging or “Doubling Down” With the Trade War? Here are 5 U.S. Stocks that “act like China” and 5 U.S. Stocks that might be a hedge.

Posted on2019-08-262019-08-27AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

So far, the trade talks have stalled, reemerged, stalled and reemerged once again, and the cycle shows little chance of stopping soon. There sometimes seems to be progress in resolving the trade disputes, but it often seems ephemeral, just beyond grasp. This has generated extraordinary turbulence in the financial markets and opens up substantial strategic opportunities for investors. But, just as there are two strong sides on the Chinese-US trade war, there are at least two strong opinions among investors. Some want to structure their portfolios as a hedge against fluctuations in China, some want to structure their portfolios to take advantage of any eventual resolution and its supposed positive impacts. Using the MacroRisk.com analytical platform, we have some hints to help both kinds of investors. For this post, we will especially be using MacroRisk’s patented Eta® Analysis that provides a look at the “Economic DNA” of a stock. Using the S&P 500 constituents as a search universe, we have found those stocks that have Eta® Profiles most like China, and those that are most opposite of China. To the extent that the trade war is reflected in the economic and financial variables used in the analysis, this may point the way to some investment opportunities for fine-tuning portfolios.

We will use two different methods to identify how “related” the stocks are to China.

The first method involves the MacroRisk’s proprietary way of determining the sensitivities and the magnitudes of these sensitivities that assets have to 18 economics factors. For example, here are the historic sensitivities or exposures of the iShares MSCI China ETF (ticker: MCHI) to the 18 economics factors:

To select stocks that are least related to China, the MacroRisk Analytics will identify which stocks have the opposite sensitivities to these 18 economics factors. It’s extremely rare that there exist stocks with exact opposite sensitivities, but the MacroRisk Analytics platform will select the stocks that come the closest to satisfying this goal. So, this first method involves analyzing the historic, economic exposures that the China ETF and the S&P 500 stocks have to the 18 economics factors.

The second method involves the returns correlations of the China ETF and the S&P 500 stocks. Stocks whose returns move in opposite directions than the China ETF are deemed to be less related (i.e., low returns correlation) and stocks whose returns move in the same directions as the China ETF are deemed to be more related to each other (i.e., high returns correlation).

Now, let’s look at the five stocks out of the S&P 500 that are least related to China (i.e., ticker: MCHI) as of 8/22/2019 using MacroRisk’s Eta® Analysis, showing statistically based economic sensitivities to the economy (i.e., 18 economic factors):

Ticker	Sector
HFC	Energy
ABMD	Health Care
NKTR	Health Care
M	Consumer Discretionary
MU	Technology

Using MacroRisk’s statistically based economic sensitivities, here are the five stocks that are most related to China:

Ticker	Sector
ARE	Financials
PNR	Industrials
MAR	Consumer Discretionary
PEG	Utilities
HPE	Technology

For illustrative purposes, we create two equally-weighted portfolios as of the day the trade war began, January 22, 2018. The first portfolio consists of stocks deemed to be least related to China on 8/23/19, and the second portfolio consists of stocks that are most related to China on 8/23/19. We compare the performances of these two portfolios to MCHI (i.e., China ETF). Please note that this illustration may be subject to a look-ahead bias because we are creating the portfolios as of 1/22/18 using “future” information available as of 8/23/19. Again, we present the information below for illustrative purposes only.

Now, let’s look at the five stocks out of the S&P 500 that are least related to China (i.e., ticker: MCHI) as of 8/22/2019 using the one-year returns correlation (i.e., 18 economic factors):

Ticker	Sector
WEC	Utilities
EVRG	Utilities
AEP	Utilities
XEL	Utilities
ES	Utilities

It’s worth noting that the five stocks that are least related to China based on the return correlation measure are all in the utilities sector.

Using returns correlations, here are five stock that are most related to China:

Ticker	Sector
AMZN	Consumer Discretionary
AME	Industrials
MXIM	Technology
CAT	Industrials
WYNN	Consumer Discretionary

Amazon tops the list of stocks that are most related to China based on the return correlation measure. Many of the third-party sellers on Amazon usually source the products they sell on Amazon from Chinese manufacturers.

Similarly, we create two equally-weighted portfolios that are least and most related to China but now using the returns correlation. Again, the information below is subject to the look-ahead bias and is therefore for illustrative purposes only.

As can be seen, even the portfolio (pink line in the graph above) created as of 1/22/19, consisting of stocks most related to China as of 8/23/19, outperformed the China ETF (green line) which points to the U.S. market as a whole outperforming the Chinese market over the period from 1/22/19 through 8/23/19 as shown below. In the information below, the S&P 500 Total Return Index is denoted as “@GU6”, and the Chinese market is denoted as “MCHI”.

In this post, we have presented stocks out of the S&P 500 that are least and most related to China using two different methods. This can assist investors in navigating the marketplace while the trade war between U.S. and China continues.

MacroRisk Analytics has a selection of proprietary analysis tools that use macroeconomic variables to provide information on tens of thousands of stocks, mutual funds, exchange traded funds, and other traded assets. Click here to see how MacroRisk Analytics can help you.

Betas of 10 Stocks with Highest and Lowest Return-to-Risk Ratios with Positive Returns in 2019

Posted on2019-06-242019-07-08AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

Using MacroRisk Analytics software, this post will present the betas, up-market betas and down-market betas for 10 stocks out of the S&P 500 Index with positive returns year to date (through 6/10/19) that have the highest and lowest return-to-risk ratios from 12/31/18 through 6/10/19. We first discussed these stocks in another blog post which you can check out by clicking here.

As a reminder, beta measures an asset’s systematic risk or the risk of an asset relative to a benchmark over a certain period of time. It measures systematic risk, attributed to the market movements (e.g., the S&P 500 Index). It doesn’t include unsystematic risk which is the portion of total risk that is not explained by the market (e.g., company-specific information). Suppose a stock has a beta of 1.20. This means that over the time period during which this beta statistic was calculated, the stock was 20% more volatile (i.e., riskier) than the benchmark. Suppose the benchmark went up by 1%, a stock with a 1.20 beta would go up by 1.2% and vice versa. If an asset has a beta that is higher than one, it is riskier than the benchmark and while a beta of less than one would indicate the asset is less risky than the benchmark.

In addition to showing the regular betas, MacroRisk Analytics software provides up-market and down-market betas. Up-market betas are calculated using returns information for days when the benchmark returns are positive, and down-market betas are calculated using returns information for days when the benchmark returns are negative. Up-market betas measure how much more volatile an asset is when the benchmark goes up. If an asset has a up-market beta higher than 1, the stock would be expected to have higher returns than the benchmark when the benchmark goes up and vice versa. In this case, the up-market beta (i.e., up-market risk) is the good kind of “risk” or the “risk” of earning more or less money relative to the benchmark when the benchmark goes up. The down-market beta, on the other hand, measures the downside risk. What happens to the stock when the benchmark goes down? If an asset has a down-market beta of less than 1, it tends to lose less value on average than the benchmark when the benchmark goes down and vice versa.

Now, let’s dive into the betas, up-market betas and down-market betas for our stocks. Using the Beta+ Holdings Table provided by MacroRisk Analytics, not only can we quickly get this information, but we can also customize the benchmark (e.g., an index, a ticker, or a previously created portfolio), the period over which we want to calculate the betas for and the frequency of returns. We used the MacroRisk Beta+ Holdings Table to export the beta results using 1, 3, and 5 years of daily returns with the S&P 500 Index as the benchmark to an Excel spreadsheet. The results are summarized below for 10 stocks out of the S&P 500 Index with the highest return-to-risk ratios from 12/31/18 through 6/10/19:

Next, we want to highlight which up-market betas were higher than their corresponding down-market betas. These are the situations when the stock has increased more than the benchmark when the benchmark went up and lost less value than the benchmark when the benchmark went down. We indicate these occurrences with a ‘1’ in the table below:

Shown below are the betas, up-market betas and down-market betas for the 10 stocks from the S&P 500 Index with positive returns that have the lowest return-to-risk ratios from 12/31/18 through 6/10/19.

Lastly, we identify which of these stocks had higher up-market betas than down-market betas.

Using these tools, we have presented the betas, up-market betas and down-market betas which can help investors get a better understanding of how the assets have performed relative to the S&P 500 Index, our selected benchmark.

Stocks with Highest and Lowest Return-to-risk Ratios Year-to-date

Posted on2019-06-122019-07-08AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

Using analysis provided by MacroRisk Analytics, we have identified 10 stocks selected from the S&P 500 Index with positive returns year-to-date that have the highest and lowest return-to-risk ratios.

We frequently see stock rankings which show best and worst performers for different time periods in terms of return. We believe that it may be as important to rank investments in terms of return-to-risk ratio. This ratio identifies how much return an investment provided per unit of risk taken. For instance, if investment A had a return of 10% and a standard deviation (risk) of 20%, its return-to-risk ratio would be 0.5. Suppose instead, we consider investment B which had a return of 10% and a standard deviation of 15%. Investment B’s return-to-risk ratio is 0.67. In other words, investment B might be viewed as a better investment in this scenario because it had a higher return-to-risk ratio. Even though both investments had the same return (10 %), investment B had a lower risk as measured by standard deviation.

Let’s take a look at a common performance benchmark, the S&P 500 Total Return Index and see how it has performed so far this year (12/31/18 through 6/10/19). We like this benchmark because it includes both price change and dividends paid to measure total return whereas the S&P 500 Index only shows the price change (or a fraction of the return that an investor would receive were he or she to invest in the index).

The year-to-date return (through 6/10/19) for the S&P 500 Total Return Index is 16.22%. Quite a stellar run coming after a dismal performance in the fourth quarter of 2018 during when this index dropped by 13.52%.

As we did earlier with our two hypothetical investments, to calculate the return-to-risk ratio for the index, we take the annualized mean return (34.84%) and divide by the standard deviation (12.99% annualized) year-to-date. The return-to-risk ratio is 2.68 (= 34.84% / 12.99%).

Now, let’s take a look at the 10 stocks out of the S&P 500 with positive returns year-to-date that have the highest return-to-risk ratios. With the help from MacroRisk Analytics, this can be done quickly using the screening tool:

The best performer year-to-date in terms of return-to-risk ratio is Tyson Foods Inc. which is in the consumer staples sector.

Using the MacroRisk Analytics screening tool, we also identified the 10 stocks out of the S&P 500 with positive returns that have the lowest return-to-risk ratios year-to-date:

Out of S&P 500 companies with positive return year-to-date, the worst performer in terms of return-to-risk ratio is FedEx Corp which is in the Industrials sector.

The goal of this post was to show companies that have provided the highest and lowest return per unit of risk taken (focusing only on those companies had positive returns year-to-date). Of course, this information is historic and in no way should be considered indicative of the future performance. Nonetheless, it might be worthwhile to be aware of these companies and try to understand why these companies have performed the way they did. In our upcoming blog posts, we will dive into some of the companies shown in this post using MacroRisk Analytics software.

If you would like to check out the tools provided by MacroRisk Analytics, click here.

As the economy changes, which stocks are most and least exposed?

Posted on2019-06-042019-06-04AuthorGeorge Arzumanyan, CFA, CIMA(R), MAFF(R), CVA(R)

After a time of seemingly economic stability, the potential for economic shock is growing. With looming trade wars and trade war disruptions, concerns over interest rates, and the usual turmoil going into a presidential election cycle, we used the MacroRisk platform to identify the ten S&P stocks with the highest exposure to 18 key economic factors and the 10 with the lowest exposure to these factors.

The MacroRisk platform provides daily estimates of a “MacroRisk level” for almost every traded U.S. and Canadian stock and fund, using a proprietary set of 18 “Eta® Factors” including International factors (Euro, FTSE100, Tokyo Stock Exchange, and Ag Exports), Prices (Energy, CPI, Gold), Monetary factors (Monetary Base and M2), and Domestic factors (unemployment rate, corporate cash flow, auto sales, and orders for new durable goods). The “MacroRisk Level” measures the overall exposure of assets and portfolios to these 18 factors.

For comparison, here are the current values of several key indices:

Index	MacroRisk Level
Russell Midcap	46
S&P Equal Weight	47
Wilshire 5000	49
Russell 1000	55
S&P 500	59
MSCI Emerging Markets	61
NASDAQ Comp	62
S&P MidCap 400	69
Dow Jones 30	75
Russell 2000	106

We then used the MacroRisk.com platform and screened over the current constituents of the S&P 500 index and identified the following as the stocks with the greatest exposure:

Name	Symbol	MacroRisk Level
Nektar Therapeutics	NKTR	939
ABIOMED Inc	ABMD	552
Micron Technology Inc	MU	502
Align Technology Inc	ALGN	479
Hollyfrontier Corp	HFC	478
Netflix Inc	NFLX	477
Advanced Micro Devices Inc	AMD	475
IPG Photonics Corp	IPGP	456
Xilinx Inc	XLNX	422
Anadarko Petroleum Corp	APC	415

The following are the lowest ten in terms of MacroRisk level:

Name	Symbol	MacroRisk Level
Westar Energy Inc	EVRG	61
Loews Corp	L	62
Torchmark Corp	TMK	65
Omnicom Group Inc	OMC	70
Intercontinental Exchange Inc	ICE	71
AFLAC Inc	AFL	74
Digital Realty Trust Inc	DLR	76
Alexandria Real Estate Equities Inc	ARE	78
Huntington Bancshares Inc	HBAN	78
Boston Properties Inc	BXP	79

The following chart shows some summary statistics and the graphical presentation of an equally weighted portfolio of the ten highest MacroRisk Level stocks, the ten lowest MacroRisk Level stocks, and the SPY as a measure of overall market attainability.

A final measure is to compute the ratio of the total return to the corresponding standard deviation of returns for the low exposure, high exposure, and SPY portfolios. This measure is like a Sharpe ratio and measures return per unit risk.

Using this method, the return to risk ratio for the SPY is 0.916, the ratio for the high exposure portfolio is 0.657, and the ratio for the low exposure portfolio is 1.293 using data from 1/1/2019 through the end of May.

While the SPY and high exposure portfolios have generally produced higher returns over this period, the smooth dark blue line, the low MacroRisk Level stocks, produced a superior risk adjusted return. Investors interested in diversifying away exposure to economic exposure during the coming months may want to consider this type of analysis using www.MacroRisk.com.

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