by Bespoke Investment Group
We've been hearing from a lot of talking heads over the past few days that this has been nothing but a short covering rally. But has it really been? We broke the S&P 500 into deciles (10 group with 50 stocks each) based on a stock's short interest as a percentage of float and then calculated the average performance of the stocks in each decile over the last three days. Below is a chart highlighting the average performance of the stocks in each decile.
The average S&P 500 stock is up 2.96% over the last three days. As shown below, the 50 stocks in the S&P 500 that are the most heavily shorted are up an average of 3.1% over this time period, while the 50 stocks that are the least heavily shorted are up an average of 2.8%. So while the most heavily shorted stocks have outperformed the least heavily shorted stocks, the difference has been minimal. The performance across deciles has been very scattered, with deciles 4, 6, and 8 doing the best, and deciles 2, 5 and 7 doing the worst. This has hardly been a short covering rally.
So which stock characteristics have been driving the market higher this week? Over at Bespoke Premium, we just released a B.I.G. Tips report where we ran our decile analysis on a number of stock characteristics including market cap, P/E ratios, dividend yield, institutional ownership, revenue exposure, analyst ratings, and more. Some of these characteristics have indeed impacted performance this week, while some (like short interest) have not. Bespoke Premium members can view the report here. If you're not a Premium member and would like to become one, subscribe today!
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