Axioma Risk Monitor
AXIOMA RISK MONITOR
Equity edition

China, South Korea and Taiwan emerge as top performers
Asia-Pacific ex-Japan risk drops below Developed Market risk
Momentum outperforms during the coronavirus crisis

 

HIGHLIGHTS FOR THE WEEK ENDED MAY 14

 
 
 

China, South Korea and Taiwan emerge as top performers

 

China, South Korea and Taiwan — among the first countries to be impacted by the coronavirus — were top performers among both emerging and developed markets last week. While they remained below the red line, the three countries recorded the smallest six-month losses (below 10% for each). All developed countries saw larger losses than the three Asian countries, except Denmark. In fact, many western European countries, such as Italy, Spain, France and the UK posted six-month losses larger than 20%. For more details on why Denmark fared better during this crisis, see our blog post, Lockdown, Partial Lockdown, or No Lockdown – and the Impact on Equity Markets.

China became one of the least risky countries, with its risk nearing 30%, while Taiwan and South Korea were in the middle of the pack. In contrast, the US became riskier than all three Asian countries, with its risk exceeding 40%, as measured by Axioma’s Worldwide short-horizon fundamental model. Colombia remained the riskiest country at nearly 70%, while Peru and Mexico were the least volatile countries as of last Thursday.

See graph from the Equity Risk Monitors as of 14 May 2020:




 

Asia-Pacific ex-Japan risk drops below Developed Market risk

 

Volatility dropped for most major equity indices last week, with the aggregate volatility of FTSE Asia-Pacific ex-Japan recording one of the largest declines among the countries and regions Axioma models track closely. Only the risk of China and Emerging Markets—which are heavily influenced by China—saw larger drops in risk over the past five days. At 32.5%, FTSE Asia-Pacific ex-Japan’s risk is now 550 basis points lower that that of FTSE Developed Market, as measured by Axioma’s fundamental short-horizon Asia-Pacific ex-Japan and Worldwide models, respectively.

See graph from the Asia Pacific ex-Japan Equity Risk Monitor as of 14 May 2020:

 

 

Momentum outperforms during the coronavirus crisis

 

Momentum investing has been the big winner during the coronavirus crisis. In most of Axioma’s medium-term fundamental models, the Medium-Term Momentum factor recorded the highest six-month returns among all other style factors in each model. Canada saw the highest Momentum return (of 11%) across all models over the past six months. Momentum fared better in Emerging Markets (7%) than Developed Markets (4%) over the same period. The main exception was Japan, where the recent fall in Momentum rendered its six-month return flat.

See graph from the Emerging Markets Equity Risk Monitor as of 14 May 2020:


 

 

 
 
Stay Connected
 
 

Events

Webinar | Inquire UK: Investment implications of Covid-19

Date: May 20, 2020
Time: 2:30 PM GMT

Join us on Wednesday for a lively discussion hosted by Inquire on the investment implications of Covid-19. We will be delving deeper into the changes in the 2020 risk landscape, and the response of quantitative portfolio managers.

Register here >


Webinar | Qontigo Insight™ Quarterly Multi-Asset Risk Review

Date: May 27, 2020
Time: 11:00 AM ET | 4:00 PM GMT

In this webinar, Christoph V. Schon, Qontigo’s Executive Director of Applied Research, explains how this has rendered traditional diversification strategies ineffective and led to surge in multi-asset class portfolio risk.

Register here >


On the Blog

Oil in a multi-asset portfolio: If you’re looking to reduce risk, look elsewhere…

Investing in oil as part of a multi-asset strategy can be risky for two reasons: first, the oil price is very volatile, and, second, because it is usually strongly correlated with the stock market.

The colossal collapse of Mortgage REITs: An omen of bad things to come?

US Mortgage Real Estate Investment Trusts (Mortgage REITs) have been crushed by the coronavirus crisis, substantially underperforming the US equity market as a whole, as their risk has skyrocketed to levels not seen by any US industry in at least three decades.

Latest Research

Mean-Reversion and Market Recoveries: Stocks Hit Hardest First Tend to Outperform… Will Covid-19 Follow the Pattern?

Do equities that suffer the greatest losses in the initial stages of a major market downturn subsequently outperform during the recovery? Here we examine the 10 largest US equity downturns of the past 38 years along with the current Covid-19 market crisis focusing on the performance of the worst performing quintile during the initial downturn.

Insights

Qontigo Commentary: Coronavirus’ Impact on Markets

Over the past few months, the world has been greatly affected by the extensive spread of the COVID-19 virus. To help our subscribers better understand the impact of these events, Qontigo's Applied Research team put together a collection of market analysis and commentary.

Axioma Risk Monitor

The Axioma Risk Monitor reports use Axioma’s solutions to bring you insights on trends in market and portfolio risk. You can subscribe to both the multi-asset class and equity edition here.

 
Qontigo ROOF Scores

Qontigo's ROOF Scores were created to quantify market sentiment — bullish or bearish? ROOF is an acronym for Risk-On/Risk-Off market conditions; the Scores are calculated from the factor returns to eight style factors from Axioma’s fundamental factor risk models, plus two indicators of changing market volatility. 



 
 

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