Read the recent article about Caliber and Affinity in Modern Trader magazine.
NYSE Update For The Week Of November 28th 2016
The 60-day Calibre of the NYSE fell last week from 462 to 457 and we can expect greater volatility and risk with this drop in diversity. The number 457 means that over the last 60 trading days the NYSE behaved as if it was made up of 457 completely independent stocks, after individual stock trends were removed. The current Caliber is at the 27th percentile of 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 fell a bit this last week and I expect it to continue its overall downward trend soon. When this correlation is falling, investors might consider stocks with lower Affinity rankings. When this correlation is rising, investors could consider stocks that have higher 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.