Factor Lab Daily Brief 2026-06-19
Momentum factor ICIR=2.70 dominates; Value factors (FCF Yield) inverted; Health Care sector shows momentum reversal
π Factor IC Test (2026-06-19)
| Factor | IC Mean | ICIR | IC+ % | Q1 Ret | Q5 Ret | L/S Ret | Signal |
|---|---|---|---|---|---|---|---|
| MOM | +0.224 | +2.70 | 100% | -0.12% | +7.95% | -8.07% | π’ Strong |
| SIZE | +0.048 | +1.25 | 87% | +2.45% | +4.51% | -2.06% | π’ Effective |
| VOL | +0.132 | +1.05 | 80% | +0.54% | +8.15% | -7.61% | π’ Effective |
| ROE | -0.041 | -1.23 | 13% | +4.82% | +3.71% | +1.11% | π‘ Inverted |
| FCF Yield | -0.059 | -1.43 | 8% | +5.64% | +2.60% | +3.04% | π΄ Persistently inverted |
| EP | -0.062 | -0.74 | 18% | +6.41% | +2.54% | +3.87% | π‘ Mildly inverted |
| BP | +0.006 | +0.08 | 46% | +3.88% | +3.06% | +0.82% | βͺ Ineffective |
Key Findings
Momentum (MOM) remains the dominant alpha source with ICIR=2.70 and 100% positive IC ratio. Q5 (strongest momentum) delivered 7.95% weekly returns vs -0.12% for Q1. The -8.07% long-short spread confirms the market is decisively rewarding winners.
Value factors are collectively inverted: Both FCF Yield and EP show significantly negative IC, meaning the market is systematically selling low-valuation stocks and chasing high-growth names. BP has near-zero predictive power (ICIR=0.08).
Volatility factor (VOL) is effective (ICIR=1.05), with high-vol stocks outperforming low-vol (Q5 +8.15% vs Q1 +0.54%), consistent with risk-on momentum leadership.
π Sector Momentum Decomposition
| Sector | IC Mean | ICIR | L/S Ret | Trend |
|---|---|---|---|---|
| Info Tech | +0.524 | +2.58 | -28.54% | π’ Extreme |
| Financials | +0.309 | +2.63 | -7.19% | π’ Strong |
| Industrials | +0.266 | +2.88 | -7.14% | π’ Strong |
| Consumer Disc | +0.252 | +2.11 | -6.21% | π’ Solid |
| Consumer Staples | +0.209 | +1.34 | -4.67% | π‘ Moderate |
| Utilities | +0.199 | +1.01 | -0.63% | π‘ Moderate |
| Real Estate | +0.124 | +0.84 | -3.83% | βͺ Weak |
| Health Care | -0.128 | -1.21 | +7.51% | π΄ Reversal |
Sector Notes
- Info Tech has the highest momentum IC (0.524) across all sectors β extreme winners-wins effect but also concentrated risk.
- Financials and Industrials show the most stable momentum (ICIR 2.63 and 2.88 respectively).
- Health Care is the only sector with a momentum reversal (negative IC, ICIR=-1.21) β losers outperform winners by +7.51%.
π Summary
- Momentum dominates: MOM ICIR=2.70 with 100% positive IC ratio β the market’s core alpha factor
- Value traps: FCF Yield, EP persistently inverted; low-valuation stocks systematically sold
- Sector divergence: Info Tech momentum strongest but concentrated; Health Care shows rare reversal
- Risk note: Extreme momentum-value divergence typically doesn’t persist β but timing the convergence is unpredictable. Follow the trend until it breaks.