Mirror-image factors are wiping out quant alpha

Rob Mannix
@RobMannix
04 Oct 2019

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Extreme correlations between different groups of stocks are fouling up the returns of widely used quant strategies.

A clustering of stocks into market darlings and market duds reached its most extreme level in September since the financial crisis. That has turned common momentum strategies – which go long high-momentum stocks and short those with low momentum – into a wholehearted bet against another popular strategy: value.

These strategies are traditionally seen as negatively correlated and

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