Negative BETA Stocks vs. SPY
through Sept 30, 2022
All stocks with negative BETA values (in alphabetical order of tickers) that pass our data validation based on with 1-year daily adjusted close price vs. S&P 500 Index ETF. There are very few negative BETA stocks now. There is only one US-listed stock with a negative BETA, and the value is low (less than 5%) in our list of all US-listed stocks that pass data validation.
Positive Net Income
COHR Coherent Inc. -0.036
Negative Net Income
There are no negative BETA stocks today.
There have not been any for over a week now.
Liquid, money losing companies are moving with the $SPY
There have not been any for over a week now.
Liquid, money losing companies are moving with the $SPY
ETFs and 'synthetic' investments
SQQQ ProShares UltraPro Short QQQ -3x Shares -3.786
TZA Direxion Daily Small Cap Bear 3X Shares -3.228
UUP Invesco DB US Dollar Index Bullish Fund -0.138
UVXY ProShares Ultra VIX Short-Term Futures ETF 2x Shares -4.099
VIXY ProShares VIX Short-Term Futures ETF -2.788
TZA Direxion Daily Small Cap Bear 3X Shares -3.228
UUP Invesco DB US Dollar Index Bullish Fund -0.138
UVXY ProShares Ultra VIX Short-Term Futures ETF 2x Shares -4.099
VIXY ProShares VIX Short-Term Futures ETF -2.788
BETA is the degree that a stock moves with a diversified stock index, such as the S&P 500 Index. BETA is calculated by the covariance of a stock with an index divided by the variance of the index. covariance x,y / variance y.
We calculate this based on a year of daily adjusted close prices of each stock against the S&P 500 Index ETF.
BETA is the degree of correlation. Some call it the systematic risk of a stock. A stock with a BETA of 1.0 means the covariance of the stock vs. the index equals the variance of the index, or that their variability matches. So, if the index rose by 2%, then the stock also rose by 2%, on average. A BETA of more than 1.0 implies the stock has greater momentum than the index. We see stocks with BETA of 3.0 or greater over the past year which have tremendous momentum, almost like leverage in your portfolio. These are very risky stocks to hold in case the market index declines.
A stock with a BETA of zero moves independently, or without a relationship, to the underlying index. For example, $TVC, which is a stock ticker that buys you a $25 bond issued by the Tennessee Valley Authority, likely has a BETA near zero. This ticker moves with interest rates and the health of the issuer, not the stock market.
Negative BETA stocks moved in the opposite direction of the index. A stock with a negative BETA fell when the index rose, and rose when the index fell. It is rare to see a negative BETA stock. Out of 3,440 stocks that traded on July 11 and passed data validation, we see 5 negative BETA stocks.
Almost all stocks move with the market, hence the expression "a rising tide lifts all boats."
Negative BETA stocks are an anomaly. Negative BETA may be caused by anomalous trading activity (e.g., MEME stocks), significant business performance against a business cycle (e.g., company loses money during an economic recovery), or a counter-cyclical stock that moves against the market (e.g., discount retailers). I use this list to find stocks that are trading strangely and could provide an edge.
A few others are in steady decline (while the market is recovering) and one doubled suddenly on very high volume, which breaks the market correlation.
The positive BETA funds that invest in commodities are seeing more correlation with the market as it rises.
There are non-stock tickers that have significant negative BETA. We call this synthetic BETA because a money manager creates an investment that 'should' move against the market, or against an index, as long as markets, liquidity and price discovery are functioning properly.
Some are commodities, like the US Dollar or Gold, which normally move against US Equities
Others are leveraged bets against something (like SQQQ which bets against the QQQ or NASDAQ Composite 100), or the TZA which bets 3x against small cap stocks like the Russell 2000 index. There is also the UVXY and VIXY which are bets on the VIX, or market volatility, which tends to rise when the market falls (but not always - it is a 2nd order effect).
Some believe a mix of positive and negative BETA stocks is a way to hedge their investment.
It is not always easy to find the right index to calculate BETA. You need clean and complete data (every day). We faced this issue the first time we analyzed the Turkish stock market for a potential Turkish client. We had to use a US-listed iShares ETF ($TUR) and lost almost half our tickers during data validation to negative BETA.
We use data validation filters to ensure liquid, continuously traded, US exchange listed, common stocks with prices and values in standard ranges which have market capitalization above a certain level. We also exclude business development corporations, closed end funds, foreign firms listed in the US, and acquisition companies.
Sept 11, 2022: We did tighten up our data validation to require more shares traded each day (35k) and a minimum share price of $1.00 throughout the measurement period of 253 trading days. We also raised the floor equity market capitalization to $250M. We do this to ensure we can trade efficiently on these results.
We calculate this based on a year of daily adjusted close prices of each stock against the S&P 500 Index ETF.
BETA is the degree of correlation. Some call it the systematic risk of a stock. A stock with a BETA of 1.0 means the covariance of the stock vs. the index equals the variance of the index, or that their variability matches. So, if the index rose by 2%, then the stock also rose by 2%, on average. A BETA of more than 1.0 implies the stock has greater momentum than the index. We see stocks with BETA of 3.0 or greater over the past year which have tremendous momentum, almost like leverage in your portfolio. These are very risky stocks to hold in case the market index declines.
A stock with a BETA of zero moves independently, or without a relationship, to the underlying index. For example, $TVC, which is a stock ticker that buys you a $25 bond issued by the Tennessee Valley Authority, likely has a BETA near zero. This ticker moves with interest rates and the health of the issuer, not the stock market.
Negative BETA stocks moved in the opposite direction of the index. A stock with a negative BETA fell when the index rose, and rose when the index fell. It is rare to see a negative BETA stock. Out of 3,440 stocks that traded on July 11 and passed data validation, we see 5 negative BETA stocks.
Almost all stocks move with the market, hence the expression "a rising tide lifts all boats."
Negative BETA stocks are an anomaly. Negative BETA may be caused by anomalous trading activity (e.g., MEME stocks), significant business performance against a business cycle (e.g., company loses money during an economic recovery), or a counter-cyclical stock that moves against the market (e.g., discount retailers). I use this list to find stocks that are trading strangely and could provide an edge.
A few others are in steady decline (while the market is recovering) and one doubled suddenly on very high volume, which breaks the market correlation.
The positive BETA funds that invest in commodities are seeing more correlation with the market as it rises.
There are non-stock tickers that have significant negative BETA. We call this synthetic BETA because a money manager creates an investment that 'should' move against the market, or against an index, as long as markets, liquidity and price discovery are functioning properly.
Some are commodities, like the US Dollar or Gold, which normally move against US Equities
Others are leveraged bets against something (like SQQQ which bets against the QQQ or NASDAQ Composite 100), or the TZA which bets 3x against small cap stocks like the Russell 2000 index. There is also the UVXY and VIXY which are bets on the VIX, or market volatility, which tends to rise when the market falls (but not always - it is a 2nd order effect).
Some believe a mix of positive and negative BETA stocks is a way to hedge their investment.
It is not always easy to find the right index to calculate BETA. You need clean and complete data (every day). We faced this issue the first time we analyzed the Turkish stock market for a potential Turkish client. We had to use a US-listed iShares ETF ($TUR) and lost almost half our tickers during data validation to negative BETA.
We use data validation filters to ensure liquid, continuously traded, US exchange listed, common stocks with prices and values in standard ranges which have market capitalization above a certain level. We also exclude business development corporations, closed end funds, foreign firms listed in the US, and acquisition companies.
Sept 11, 2022: We did tighten up our data validation to require more shares traded each day (35k) and a minimum share price of $1.00 throughout the measurement period of 253 trading days. We also raised the floor equity market capitalization to $250M. We do this to ensure we can trade efficiently on these results.
Our video about negative BETA
We frequently tweet on this topic.
Negative BETA Stocks (updated)
— Chicago Quantum (@chicago_quantum) May 9, 2022
Very few common stocks (market cap > $500M) have negative BETA, but a few ETFs can give significant negative BETA exposure.https://t.co/c6SPXnLCRB$BTOG $IHS $K $NEM $FATH $SES
ETFs listed on the webpage