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What are we looking for?

Canadian exchange-traded funds with positive absolute and relative momentum, using the Dorsey Wright & Associates (DWA) fund score ratings.

The screen

There are many parallels that can be made between investing and sports. Throughout any sports season, head coaches and players must be able to adapt to tricky schedules or injuries, just like a portfolio manager has to adapt to a changing market. General managers try to identify value in the draft, just like a value manager might try to find a mispriced stock. Teams are ultimately judged by their performance – just like investing.

One way to incorporate performance into investment analysis is to analyze securities by momentum and relative performance. Momentum is a well-documented investment factor that is based on the premise of owning securities that have performed well relative to peers while avoiding securities that have done the opposite. Evidence from the past has shown that funds with higher momentum generally outperform their peers over time.

Today's screen provides a list of the highest scoring Canadian-listed ETFs, using DWA's momentum scores. The screen is ranked according to the DWA fund score, which ranks the funds by their momentum relative to the market and their peers as well as on an absolute trend basis. Scores range from zero to six and we typically look for funds with scores in the four-to-six range, with a higher score indicating greater momentum characteristics.

More about Dorsey Wright & Associates

The Dorsey Wright & Associates (DWA) platform is a technical research product that automates the portfolio-management process and helps identify investment ideas across asset classes and instrument types. The DWA platform is available via Thomson One, a Thomson Reuters product, and can be accessed by contacting your local Thomson Reuters support representative.

What did we find?

The top 10 Canadian ETF results as ranked by the DWA momentum score are presented in the accompanying table, with the highest scoring fund being the iShares Canadian Fundamental Index ETF with a score of 5.92. Not surprisingly, this fund has seen strong price-return performance, gaining more than 41 per cent over the trailing 12-month time period. The BMO S&P/TSX Equal Weight Base Metal fund showed very strong returns over both 90 days and 12 months, yielding about 24 per cent and 124 per cent, respectively.

This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.

Ryan Gottschalk works in the financial and risk unit of Thomson Reuters and specializes in asset management.

Canadian ETFs with strong momentum characteristics

RankCompanyTickerLast Price ($)ScoreTrendDiv. Yield (%)90-Day Perf. (%)12-Month Perf. (%)
1iShares Canadian Fundamental Index ETFCRQ-T15.575.92Pos0.816.8641.42
2Horizons S&P/TSX 60 Index ETFHXT-T30.915.85Posn/a5.1733.06
3iShares Canadian Jantzi Social ETFXEN-T23.395.80Pos1.506.3730.31
4BMO Junior Oil Index ETFZJO-T17.565.77Pos0.688.2071.48
5BMO Equal Weight US Banks HedgedZUB-T25.205.71Pos1.5924.6944.41
6iShares CDN Large Cap 60 Index FundXIU-T22.945.71Posn/a4.4628.95
7iShares Canadian Russell 2000XSU-T28.775.71Pos1.539.8935.13
8iShares S&P US Dividend Growers Index FundCUD.A-T36.765.70Pos1.276.0623.94
9BMO S&P/TSX Equal Weight Base MetalZMT-T10.175.68Neg0.9824.02123.52
10First Trust AlphaDEX U.S. Industrials Sector Index ETFFHG-T24.255.67Posn/a14.2323.35

Source: Dorsey Wright & Associates via Thomson One