factor · Sector
Sector momentum bets that stocks in industries that have been rallying keep rallying for the next 1-3 months. Most of the equity-momentum premium decomposes into sector trends: Energy moves together when oil rallies, Tech moves together when growth comes back into favour. The factor rides the wave at the industry layer rather than the single-stock layer.
In 2023, every semiconductor stock — NVDA, AMD, AVGO, MU — moved up roughly together as AI capex took off. The within-industry dispersion mattered (NVDA outperformed) but the across-industry dispersion mattered more (semis beat utilities by 50%). Sector momentum captures the industry-level wave: which sectors are aggregating the most positive Framler scores right now, and which are aggregating the most negative. A high-quality stock in a falling sector still tends to fall; a mediocre stock in a leading sector still tends to rise. The factor reflects this gravitational pull explicitly.
inputs · per-sector aggregate Framler score (engine's own view)
· sector index momentum on a recent lookback
· sector breadth — fraction of names rallying
ideas · three anchors blended into a sector-level signal
· same sector score assigned to every ticker in the sector
· within-sector dispersion belongs to the other factors in the composite
output · cross-sectional standardised scoreThree anchors so the factor doesn't reduce to a single number. Blend weights and the exact momentum lookback are calibrated and proprietary. Public: the three anchors, the design decision to broadcast a single sector score to all members of the sector, and the academic structure (Moskowitz-Grinblatt 1999 plus a breadth correction motivated by Lo-MacKinlay 1990).
Sector membership comes from the universe table — thirteen buckets, close to the GICS sectors (Technology, Financial Services, Industrials, Healthcare, Consumer Cyclical, Consumer Defensive, Consumer, Basic Materials, Energy, Real Estate, Communication Services, Utilities) but with Semiconductors broken out from Technology as its own group, because its members trade together closely enough to deserve a separate benchmark. Sector-aggregate Framler scores are computed during the daily universe sweep using the prior day's per-ticker scores, so no temporal leakage. Sector-index momentum uses an equal-weight composite within the GICS sector to avoid contamination from the megacap tail. Breadth is the fraction of within-sector tickers carrying a bullish Framler verdict that day.
Sector is the slowest-moving factor in the composite — it's measured at the industry layer, so it changes weekly rather than daily. It pairs with Spillover (Cohen-Frazzini 2008): in the live confluence library the two meet in the bearish SECTOR BREAKDOWN pattern — a ticker still elevated while its sector and spillover both roll over is a mean-reversion candidate. Sector also amplifies single-stock momentum — a high-momentum stock in a high-momentum sector is doubly bullish, and we capture this in the regime-conditional weights rather than as a separate confluence pattern. In risk-off regimes, sector amplifier is reduced — sector rotation reverses unpredictably during macro shocks.
Two limitations. (1) Bucket coarseness. Even with Semiconductors split out, Technology still holds both CRM (enterprise software) and AAPL (hardware), which trade differently most quarters, and our single 'Consumer' bucket mixes defensive staples with cyclical names. The sector taxonomy is coarser than ideal for fine sector rotation. We could refine further, but the trade-off is sample size — 50-stock sub-sectors give noisy aggregates. (2) Macro shocks reset sectors abruptly. The energy sector's 2020 collapse and 2022 rebound were both regime-driven, and sector momentum mis-fired at both turns. The regime amplifier mitigates by halving sector's weight in risk-off, but sectors that abruptly become regime-driven (energy after a war, healthcare in a pandemic) remain a known noise source.
Every ticker page shows the per-factor decomposition. The Sector score is one of thirteen composing the 0–100 the composite score.