Z-Score Analysis
Z-score momentum is a powerful quantitative momentum tool because it standardizes recent performance against historical norms, creating a statistically robust momentum signal. Here's how it works:
The Z-Score Formula
Z-Score = (Recent 1M Log Returns - Mean of 6M Log Returns) / StdDev of 6M Log Returns
Why It's Effective for Momentum
1. Statistical Significance Detection
- Identifies when recent 1-month performance is statistically unusual compared to the 6-month baseline
- Z-scores > +2 indicate strong positive momentum (>95th percentile)
- Z-scores < -2 indicate strong negative momentum (<5th percentile)
2. Cross-Asset Standardization
- Normalizes momentum across different assets with varying volatilities
- A tech stock with 40% annualized vol vs a utility stock with 15% vol can be compared directly
- Enables portfolio-level momentum ranking
3. Risk-Adjusted Momentum
- Unlike raw returns, z-score accounts for the typical volatility of each asset
- A 5% move in a low-vol stock may be more significant than a 10% move in a high-vol stock
- Volatility-adjusted momentum signal
Select time period for analysis
Total Stocks analyzed: 0 for All Periods
Company | Period | Percentage Return | Z-Score ↓ |
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