Venn by Two Sigma January 2024 Factor Performance Report: Momentum, Crowding, Foreign Currency, and Emerging Markets

· By Christopher Carrano

Let’s begin our January 2024 report by sharing the performance of the Two Sigma Factor Lens for the month.

Exhibit 1: Two Sigma Factor Lens Performance

©2024 Two Sigma Investments, LP. This image is for informational purposes only. See for more disclaimers and disclosures. Source: Venn by Two Sigma. The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using monthly data for the period Oct 1997 - Jan 2024


Momentum: Our Momentum factor had one of its best months in its history, up close to 7% on the month. Performance benefited from the rally seen in tech amid strong earnings from big names. Broadly speaking, tech companies continue a relative upward price trend on the prospects of lower future borrowing costs. 


Crowding: Our Crowding factor goes short US stocks with high residual short interest and long those with low residual short interest. As a result, positive returns this month indicate that short bets paid off above and beyond what can be found in other equity style exposures. While there is a positive return premium associated with our Crowding factor historically, we have seen an accelerated trend in positive performance beginning in mid February of 2021. Short sellers are sometimes thought to represent an informationally-advantaged group in the aggregate. As a result, recent performance trends in our Crowding factor may indicate that easier-to-identify and/or higher quality information has been broadly available to inform short positions. 


Exhibit 2: Crowding Factor Cumulative Return

Source: Venn by Two Sigma


Foreign Currency: We write our performance reports using our USD factor lens, which means that negative returns from our Foreign Currency factor imply foreign currency depreciation relative to the USD. Notably, this factor attempts to remove overlapping risks associated with Equities, Commodities, Credit, and Interest Rates via residualization. As a result, -2.03% performance in January communicates a more pure and independent representation of relative foreign currency depreciation vs the USD than might be found in a typical US dollar index exposure. USD appreciation was in part driven by expectations for slower than expected rate cuts in the US.1


Emerging Markets: All three building blocks for this factor (equity, debt, and currencies) were down this month before applying our residualization process. Recent negative sentiment has stemmed predominantly from various economic issues in Chinese markets.2 However, it's worth noting that our EM factor has been trending downwards as far back as 2010, and historically we have found that there is not a return premium associated with our more pure EM factor.


Exhibit 3: Emerging Markets Factor Cumulative Return Since 1997

Source: Venn by Two Sigma







This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.


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