Currently, US Medium-Term Momentum’s correlations with most other style factors in Axioma’s US4 medium-horizon model are negative. Momentum and Value recorded the largest negative correlation (-0.36) among US style-factor pairs as of last Thursday, suggesting that Value stocks lack momentum, and that high Momentum stocks do not necessarily offer good value. In contrast, Momentum’s correlation with Growth was the highest at 0.39 points. The only other factors showing positive correlations (albeit of small magnitude) with Momentum were: Size (0.12) and MidCap (0.03). Since the beginning of the year, Momentum’s correlation with Value, Leverage, Dividend Yield, Liquidity, Market Sensitivity and Volatility became more negative. Investors tilting their portfolios on multiple style factors may see a big and unexpected impact on their portfolio risk due to changing factor correlations.
See graph from the US Equity Risk Monitor as of 31 January 2019: