PortfolioMath

What is the Affinity ranking and why is it significant historically?

The calculation of the overall Caliber of the NYSE assigns a number to each stock called its Affinity and the overall trends of individual stocks are not included in this calculation. The graphs below summarize tests with historical data which suggest that stocks with higher Affinities had somewhat better future returns on average. This relationship only becomes apparent after averaging large numbers of future returns so these graphs hide the enormous variability of returns which are often negative no matter how highly a stock is ranked.

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Stocks With Higher Weekly Affinity Rankings Had Better Future Returns

The following graph shows that stocks with higher weekly Affinity rankings had somewhat better future returns on average historically. This graph only shows the averages of future returns and hides the enormous variability of returns which are often negative no matter how highly a stock is ranked. This historical relationship between the weekly ranking and future returns may no longer be present in current markets.

Points were obtained by averaging 10000 60-day future returns and using over 180000 samples from the last 25 years.

Stocks With The Highest Affinities Had Better Future Returns

The following graphs show that stocks with the highest Affinities in the NYSE had somewhat better future returns on average historically. These graphs only show the averages of future returns and hide the enormous variability of returns which are often negative no matter how highly a stock is ranked. These historical relationships between Affinity and future returns may no longer be present in current markets. The Affinity values and percentiles of individual stocks are not available on this website.

Points were obtained by averaging 10000 60-day future returns and using over 180000 samples from the last 25 years.


As the next graph shows, the results in the previous graph can be improved if we use 120 instead of 60 prior trading days of data to calculate the Affinity of each stock.

Points were obtained by averaging 1000 120-day future returns and using over 90000 samples from the last 25 years.

High Affinity Stocks Are More Expensive On Average

The following graph show that high Affinity stocks are typically more expensive which suggests Affinity is a quality that has value in the marketplace.

The points on this graph were obtained by calculating the affinity of each stock in the NYSE for the 60 day period ending on October 16, 2015.

Disclaimer

The information on this website:
  • is for the purposes of assessment only
  • is experimental and not suitable for any kind of use by investors except appraisal
  • does not in any way constitute investment advice
  • is not guaranteed to be error free or uninterrupted