growth vs. value (again)

jim leahy

this weekend there were several articles in barrons re. the current rotation from growth to value. the
reasoning is the upcoming re-opening of the economy due to favorable news on a covid-19 vaccine will prompt
more investments in value stocks. some of the analysts they referenced expect this rotation to continue for a few
months into 2021, maybe as long as a year. i haven't completely bought into it yet.

they referenced iwn as the value etf and iwf as the growth etf. based on that, i plotted some relative performance
graphs over various time frames. i substituted qqq for the growth etf because i like that one better. the relative
performance between the 2 is almost identical and qqq is more liquid. the first graph plots the performance over
the last year. the second graph covers about 3 months, and the 3rd is the last month. i also ran my pairs statistics
script on these stocks to check cointegration and correlation. qqq and iwn check both boxes.

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i'm not sure if i'll do this trade but i'm going to model it tomorrow and watch it for a while. the volatility-adjusted
hedge ratio is 2:1 (2 iwn for every 1 qqq). anyone have any thoughts on this? good trade? too late? don't believe any of it?


Active member
Seems a little late unless the trend continues but it's unknown the magnitude and the time frame
It can also swing back after it hits resistance on the upside I believe those gaps will be filled eventually
So you have to time it just right to get the most of it Basically you have to be in it before the gap up otherwise you just get whipsawed

jim leahy

i modeled the trade on the 16th. iwn had already popped because of the barrons article so i
didn't do it with real money. bad decision. here's the equity graph, so far, based on short 1, long 2
of what ever multiplier you want to use. although there's no red on a closing basis, you did have
to take some intra-day heat.