Read the recent article about Caliber and Affinity in Modern Trader magazine.
NYSE Update For The Week Of September 19th 2016
The Caliber of the NYSE fell last week from 627 to 554 which means there is less diversity in the NYSE and consequently more volatility and risk. The number 554 means that over the last 60 trading days the NYSE behaved as if it was made up of 554 completely independent stocks, after individual stock trends were removed. The current Caliber is greater than 55% of all Calibers over the last 25 years. Higher Calibers sometimes coincided with better market conditions in the past but this might not be the case in the future.
The correlation between a stock's return and it's Affinity has been quite volatile over the last couple of weeks and may now have reached its maximum in which case we will see a significant change in the character of this market. If this correlation was rising, investors could consider stocks that have higher Affinity rankings. On the other hand, if this correlation was falling, investors could consider stocks with lower Affinity rankings. In general, the market appears to oscillate between favoring high or low Affinity stocks and the correlation tells you where the market is in that cycle. The overall market can rise or fall for any value of this correlation but the periods when this correlation is rising might be the most comfortable for investors.