Read the recent article about Caliber and Affinity in Modern Trader magazine.
NYSE Update For The Week Of October 24th 2016
The 60-day Calibre of the NYSE continued to fall last week from 496 to 489 which means there is less diversity in the NYSE so we can expect more volatility and risk. The number 489 means that over the last 60 trading days the NYSE behaved as if it was made up of 489 completely independent stocks, after individual stock trends were removed. The current Caliber is at the 34th 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 has been slowly falling over the last couple of weeks as shown on the graph below. 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.