How often are scores updated?

Scores are updated daily using end-of-day price and volume data. The scoring pipeline runs after market close, so scores reflect the most recent full trading day.

Why might a stock score change suddenly?

Earnings releases, sector rotations, broad market selloffs, or large volume spikes can all cause rapid score changes. Because scores are relative rankings against the full stock universe, a stock can also move if the stocks around it change significantly.

What does a low score mean?

A low score means the stock has weak recent momentum relative to other stocks in the universe. It does not necessarily mean the stock is a bad investment — it may be undervalued, in a temporary dip, or in a sector rotation. Momentum measures trend strength, not fundamental quality.

Is this financial advice?

No. Momentum SaaS is an educational and informational tool. Scores reflect historical price trends and do not predict future performance. Nothing on this platform constitutes a recommendation to buy, sell, or hold any security. Always conduct your own research or consult a qualified financial advisor before making investment decisions.

How is this different from analyst ratings?

Analyst ratings are forward-looking opinions based on fundamental analysis — earnings forecasts, industry outlook, and company-specific factors. Momentum scores are backward-looking measurements of recent price trends. They answer different questions: analysts try to predict where a stock is going, while momentum scores measure where it has been trending.

Why does trading activity matter for momentum?

Academic research shows that trading activity patterns can help distinguish sustainable momentum from short-lived spikes. Stocks in the early stages of a trend, with relatively quiet trading, tend to sustain their momentum longer than those experiencing heavy trading volume. This insight, documented by Lee & Swaminathan (2000), is one of many research findings incorporated into our scoring approach.

Methodology

Last updated: 2026-02-25

Momentum SaaS measures the strength of price trends using a composite scoring system grounded in decades of academic research. Every stock receives a score from 0 to 100 — think of it as a speedometer for trend strength, not a GPS telling you where to go.

1. How Scores Work

Each stock is scored daily on a scale of 0 to 100 using end-of-day price and volume data. The Momentum Score is a proprietary multi-factor ranking that combines multiple momentum and quality signals — including price trends across different timeframes, proximity to recent highs, and trading activity patterns — into a single composite score. The exact formula, component weights, and signal definitions are proprietary. Within each factor, stocks are ranked against the full universe and converted to a 0-100 percentile. The final composite score is the weighted average of these percentile ranks. Scores are classified using a traffic light system: - Strong (70-100): The stock shows robust upward momentum across most timeframes. - Caution (40-69): Mixed signals — some timeframes positive, others weakening. - Weak (0-39): Recent price trends are broadly negative or deteriorating. This approach builds on the cross-sectional momentum factor first documented by Jegadeesh & Titman (1993) and validated across 47+ countries and multiple asset classes.

Strong70 – 100Robust upward momentum

Caution40 – 69Mixed signals

Weak0 – 39Negative or deteriorating trend

2. Our Scoring Approach

The Momentum Score draws on decades of academic research into price momentum, relative strength, and trading activity patterns. Rather than relying on a single metric, the algorithm evaluates stocks across multiple dimensions of trend strength. The scoring factors capture complementary aspects of momentum: - Price trends across multiple timeframes, from short-term shifts to long-term persistence - A stock's position relative to its recent highs - Trading activity patterns that distinguish early-stage trends from late-stage reversals - Relative strength indicators that confirm or challenge the prevailing trend Each factor is grounded in peer-reviewed financial research. The specific combination of factors, their relative weights, and the signal construction methodology are proprietary. The multi-factor approach is designed to be more robust than any single momentum measure. Academic research has shown that combining complementary momentum signals reduces crash risk and improves consistency across different market environments.

3. Backtested Performance

The current scoring formula (V2-C1) was selected after extensive backtesting across multiple candidate strategies, including signal-based and machine learning approaches. The chosen formula delivered strong risk-adjusted returns across Monte Carlo simulations with a broad global stock universe. Key results (median across Monte Carlo simulations): - Annualized return (CAGR): 30.6% - Sharpe ratio: 1.53 (range: 1.19 to 1.68) - Monthly hit rate: 66.0% - Maximum drawdown: 20.6% In practical terms, the strategy produced positive monthly returns roughly two out of every three months — but was negative one out of three. At its worst, the portfolio declined approximately 21% from peak to trough before recovering. The V2-C1 formula was specifically validated using Monte Carlo simulation to guard against survivorship bias — a common pitfall where backtests look better than reality because they only include stocks that survived. Several candidate strategies that appeared strong on a single-market backtest collapsed when tested against the broader universe. Backtest methodology: - Universe: 16,382 stocks from 14 global exchanges - Period: January 2010 to December 2025 (192 months) - Portfolio: 50 stocks, equal-weighted, rebalanced monthly - Transaction costs: 10 basis points round-trip - Validation: Monte Carlo simulation with random date sampling Important: These are hypothetical backtested returns, not live trading results. Past performance does not guarantee future results. Backtested data is subject to survivorship bias, as the stock universe is based on currently listed securities.

Median CAGR

30.6%

Sharpe Ratio

1.53

Range: 1.19 – 1.68

Monthly Hit Rate

66.0%

Max Drawdown

20.6%

Past performance does not guarantee future results. Hypothetical backtested results across Monte Carlo simulations, January 2010 – December 2025.

4. Limitations

A speedometer, not a GPS Momentum scores measure trend strength — how fast a stock is moving, not where it is heading. A high score means strong recent momentum; it does not mean the stock is undervalued, fundamentally sound, or likely to keep rising. Momentum crash risk Momentum strategies can experience sharp, sudden losses during market regime changes. Research by Daniel & Moskowitz (2016) documented that momentum portfolios are vulnerable to "crashes" when markets reverse quickly — for example, during recoveries from bear markets. Scores can drop rapidly during these events. Survivorship bias The backtested performance data uses a universe of currently listed stocks. Companies that were delisted due to bankruptcy, mergers, or other events are not included. This tends to make historical returns look slightly better than they would have been in real-time. One factor among many Momentum is one of several well-documented factors in academic finance (alongside value, quality, size, and low volatility). No single factor works in all market environments. Momentum scores should not be the sole basis for investment decisions — they are one piece of a broader research process.

5. Frequently Asked Questions

How often are scores updated?: Scores are updated daily using end-of-day price and volume data. The scoring pipeline runs after market close, so scores reflect the most recent full trading day.
Why might a stock score change suddenly?: Earnings releases, sector rotations, broad market selloffs, or large volume spikes can all cause rapid score changes. Because scores are relative rankings against the full stock universe, a stock can also move if the stocks around it change significantly.
What does a low score mean?: A low score means the stock has weak recent momentum relative to other stocks in the universe. It does not necessarily mean the stock is a bad investment — it may be undervalued, in a temporary dip, or in a sector rotation. Momentum measures trend strength, not fundamental quality.
Is this financial advice?: No. Momentum SaaS is an educational and informational tool. Scores reflect historical price trends and do not predict future performance. Nothing on this platform constitutes a recommendation to buy, sell, or hold any security. Always conduct your own research or consult a qualified financial advisor before making investment decisions.
How is this different from analyst ratings?: Analyst ratings are forward-looking opinions based on fundamental analysis — earnings forecasts, industry outlook, and company-specific factors. Momentum scores are backward-looking measurements of recent price trends. They answer different questions: analysts try to predict where a stock is going, while momentum scores measure where it has been trending.
Why does trading activity matter for momentum?: Academic research shows that trading activity patterns can help distinguish sustainable momentum from short-lived spikes. Stocks in the early stages of a trend, with relatively quiet trading, tend to sustain their momentum longer than those experiencing heavy trading volume. This insight, documented by Lee & Swaminathan (2000), is one of many research findings incorporated into our scoring approach.

Not investment advice. Learn more