Value + Momentum Factor Combination

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updateRebalanced: N/AAuthor: Value & Momentum Everywhere

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CAGR

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15.1%

Compound Annual Growth Rate

Max Drawdown

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-21.8%

Worst peak-to-trough decline

Sharpe Ratio

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0.71

Risk-adjusted return metric

Win Rate

verified

66%

Percentage of positive months

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Allocation Locked

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Strategy Methodology

The Value + Momentum Factor Combination (VM-FC) strategy harnesses the two most robust premiums in financial history. It rotates into assets that are both mathematically "cheap" (Value) and exhibiting strong recent price performance (Momentum).

check_circleValue Factor: Identifies stocks with low Price-to-Book and Price-to-Earnings ratios, buying undervalued assets.
check_circleMomentum Factor: Identifies stocks with the highest returns over the past 12 months, riding the wave of market winners.
check_circleCombination: By holding both simultaneously, the strategy aims to smooth out the periods when one factor underperforms the other.

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Academic Backing

Heavily inspired by the seminal paper "Value and Momentum Everywhere" by Asness, Moskowitz, and Pedersen (2013). Their research found that value and momentum are negatively correlated, meaning combining them offers significant diversification benefits.

Parameters

Momentum Lookback

12 Months (Excl 1)

Value Metric

Composite (P/B, P/E)

Correlation

Negative (-0.4)

Rebalancing

Monthly

Monthly Rebalancing Process

4-Step Execution

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Step 1

Universe

Liquid US & Intl Stocks

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calculate

Step 2

Factor Scoring

Value Rank + Momentum Rank

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sort

Step 3

Combined Rank

Average both scores

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Step 4

Invest Top 10%

Equal weight allocation

STEP 1 & 2

Calculate Factor Scores

We don't just guess which stocks are good. We score thousands of assets based on rigorous data points.

savingsValue Score

Rank stocks by cheapness. We look for low Price/Earnings, Price/Book, and Price/Cashflow ratios compared to peers.

trending_upMomentum Score

Rank stocks by trend. We calculate the total return over the last 12 months, excluding the most recent month.

STEP 3

The Combined Rank

The magic happens when we combine the lists. A stock that is cheap but crashing is a "value trap". A stock that is rising but expensive is a "bubble". We want stocks that are BOTH cheap AND rising.

Example Evaluation

Stock A (Value Trap)Cheap ✅ / Falling ❌

Stock B (Bubble)Expensive ❌ / Rising ✅

Stock C (Winner)Cheap ✅ / Rising ✅

Target Selection

Top 10%

of the combined universe

Recent Monthly Returns

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	YTD
2026	+4.24%	+0.00%	-	-	-	-	-	-	-	-	-	-	+4.24%
2025	+4.93%	+1.01%	-4.50%	+1.34%	+5.47%	+2.79%	+0.03%	+2.12%	+3.84%	+1.45%	-0.44%	+1.26%	+20.64%
2024	+2.70%	+7.15%	+5.23%	-4.85%	+5.34%	-1.22%	+2.25%	+5.91%	+2.64%	-0.81%	+6.12%	-5.60%	+26.62%