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Lowell Herr
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Retired physics instructor and now editor of the ITA Wealth Management investment blog.
My company:
ITA Wealth Management
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ITA Wealth Management
  • Cluster Analysis Recommendations: 23 July 2014 7 comments
    Jul 23, 2014 4:03 PM | about stocks: VYM, RWX, PCY, VWO

    The following screenshots present a quick summary of ETF rankings, Cluster Weighting Momentum (CWM) analysis, and a summary of the analysis.

    ETF Rankings: Below is the ETF (plus BRK-B) rankings of 30 securities used to populate most ITA ( itawealth.com ) portfolios. ETFs under-performing SHY are sold out of the portfolio as we are only interested in the top performers found in cluster where the clusters are formed from low correlated securities.

    (click to enlarge)

    CWM Recommendations: Using specific software, correlations between ETFs are calculated and grouped into as many as 10 clusters. The top performing ETF is identified within each cluster and the number of shares are recommended based on the size of the portfolio and the cash available. Those recommendations are found in the following table.

    (click to enlarge)

    Cluster Rankings and Weightings Summary: The following table is simply a compilation of the critical material from the above table. Note there is no recommendation from Cluster #10 as both GLD and DBC are performing below SHY our cutoff ETF.

    (click to enlarge)

    Disclosure: The author is long VTI, RWX, VNQ, VYM, PCY.

    Additional disclosure: I hold most ETFs showing in the above graphs.

    Stocks: VYM, RWX, PCY, VWO
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Comments (7)
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  • anarchist
    , contributor
    Comments (1513) | Send Message
     
    The last table is the current portfolio with allocations? The reason I ask is because there are 9 stocks today and July 3 there were 5 stocks, almost double.
    Thanks.
    23 Jul 2014, 05:54 PM Reply Like
  • Lowell Herr
    , contributor
    Comments (1058) | Send Message
     
    Author’s reply » Yes, today there are nine (9) ETFs. The software permits one to set the number of clusters. In this analysis I set it for the maximum. Cluster 10 is not represented as Cluster 10 ETFs are under-performing SHY.

     

    I could have limited the number to four or five, but chose not to in this example.

     

    Lowell
    23 Jul 2014, 07:11 PM Reply Like
  • anarchist
    , contributor
    Comments (1513) | Send Message
     
    Thanks, I have been tracking you cluster portfolio for about 8 days and it has done remarkably well in this up and down market.
    23 Jul 2014, 09:57 PM Reply Like
  • bobswee
    , contributor
    Comments (12) | Send Message
     
    Thank you for this analysis. I could not find a similar posting in the recent past. Do you post periodic updates to the etf's rankings and cluster analysis on a regular basis or just sporadically? Thanks.
    25 Jul 2014, 11:02 AM Reply Like
  • Lowell Herr
    , contributor
    Comments (1058) | Send Message
     
    Author’s reply » Bob...,

     

    I use approximately 30 securities to populate the portfolios tracked over at ITA Wealth Management. Those 30 ETFs (including one stock) are ranked on a regular basis. For example, I am reviewing a portfolio (Kepler) today and there will be a ranking within that review. In addition, the low correlated ETFs will be identified. The rankings are rarely posted on Seeking Alpha.

     

    Lowell
    http://itawealth.com
    25 Jul 2014, 11:08 AM Reply Like
  • bobswee
    , contributor
    Comments (12) | Send Message
     
    Are they updated on your site for members? I don't have Excel and was wondering if I could get prompt updated info as a member or if I would need to have Excel and the Cluster add-in myself to get regular updates for a particular portfolio.
    25 Jul 2014, 02:39 PM Reply Like
  • Lowell Herr
    , contributor
    Comments (1058) | Send Message
     
    Author’s reply » Bobswee,

     

    Most of the ETF rankings are for Platinum members, but on occasion it is available for Guest members.

     

    The software is an Excel program and it is available for Platinum members. To run the Cluster analysis also requires ownership of a program called the Hoadley add-in. This is a program written by Peter Hoadley and the cost is around $140.

     

    Lowell
    25 Jul 2014, 03:26 PM Reply Like
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