Momentum Screening Tool – Version 2

Unveiling a screening tool for high momentum stocks in the Nifty 500 Universe.

The methodology is similar to that use by NSE for its Momentum 30 Index. Except, the time frame has been shortened. The original index uses returns of 6 months and one year on an equi-weighted basis to calculated the metric they call Momentum Ratio”.

However, since most momentum is anyway short lived in today’s fast changing world, I decided to make it on a 1 month and 3 month time frame. Another deviation from their methodology is the absence of log-normalization of the SD of returns for calculating the ratio. Another deviation is that the SD has been calculated on a quarterly basis (SD(Returns)*sqrt(60)). Edit suggested by @jace48 on twitter was to increase the duration for calculation of SD of daily returns (made it yearly). Basically to make the scaling of price returns less variable and regime independent.

Finally, I made a small twist in reporting of the list, by varying the weightages of 1 month momentum ratio and 3 month momentum ratio.
1. Equi-weighted is similar to NSE methodology and gives equal weight to both the ratios (0.5:0.5)
2. Quick-weighted gives a higher weightage to 1 month ratio (0.75:0.25)
3. Steady weighted gives a higher weightage to 3 month ratio (0.25:0.75)

The stock list will be updated daily after the NSE CM Data comes out.
Those who are interested in understanding more, can scrutinize the data generated from HERE.

Adding a New Feature to the Momentum screener.

Since the plethora of names can be quite confusing, adding a section which shows those stocks in Quick-weighted category, which still aren’t in the Equi-weighted category (LatestEntrants) and those in the Equi-weighted category, which still aren’t in the Steady-weighted category (MediumEntrants).

Adding yet another New Feature to the Screening tool:
Since the small caps have a much more fast and furious rally than large caps, they tend to show up much more often in the screener, thus making it a poor choice for those who wish to stay within the large cap universe.
Modified the results such that stock selection happens from Nifty 100 (Large caps), Nifty Midcap 150 (MidCaps) and Nifty Smallcap 250 (Smallcaps) separately. This gives you much more flexibility in following risk adjusted momentum strats.

Largecap Universe Momo stocks
LargeCap Medium Entrants
LargeCap Latest Entrants
MidCap Momo Stocks
MidCap Medium Entrants
MidCap Latest Entrants
SmallCap Universe Momo Stocks
SmallCap Medium Entrants
SmallCap Latest Entrants

For those interested, a video explaining the code and methodology behind the momentum screener. Some explanation asked for by @kswindia on twitter has been added.

The code will be shown in the explanation video which will soon be published, but will only be provided to those interested. That can be arranged through DM on twitter.

4 thoughts on “Momentum Screening Tool – Version 2”

  1. Hi,
    Is it possible to mention on which date stock got added in specific category.
    It will help viewer to backtest and decide entry and exit parameters.

    1. I working on a system where datewise data history will be available as a google drive download. The data will be added sequentially everyday. Need to more more coding to print out previous few year’s data. Not possible right now due to my busy schedule.

  2. Pingback: Does Momentum Really Work on Indices? - Alpha Leaks

  3. What do you exactly mean by Another deviation from their methodology is the absence of log-normalization of the SD of returns for calculating the ratio?

    I checked NSE methodology – they calc SD of log returns only.

    NSE – Std.Deviation (σp ) : Annualised standard deviation of lognormal
    daily returns of the stock for 1 year

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