Video: Man AHL Explains Cross Sectional Momentum

Man AHL created the AHL Explains video series in an effort to demystify quantitative investing through an engaging and user-friendly medium. The videos seek to bring essential quantitative investing concepts to life through illustrations and graphics, and explain the key concepts in futures trend following in a simple and accessible way.

Cross-sectional momentum strategies are distinct from time series momentum strategies. While the latter uses price movements over various “time series” to determine the direction of a security’s trend, the former divides up an entire market, such as the FTSE 100, into “cross-sections” and invests accordingly. The example used by Man AHL in this video involves the one-year returns of the individual stocks that comprise the FTSE 100. A cross-sectional momentum strategy might invest in the top-performing one-third of the FTSE, while short-selling the bottom one-third of issues. Cross-sectional momentum traders prefer longer-term time scales since stocks tend to exhibit mean reversion over shorter time periods.

AHL Partners LLP is the sub-advisor to the American Beacon AHL Managed Futures Strategy Fund.

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