In my previous post, I compared 12 trend indicators in a systematic sector ETF rotation strategy, examining how different measures of price trends affect investment performance.
That analysis focused on how sectors are ranked and selected. But an equally important question remains: How should those selections be combined into a portfolio?
Should a momentum strategy concentrate on a few strong sectors or diversify more broadly? And should portfolio weights be equal, or reflect momentum strength, volatility, or relative rankings?
In this follow-up, I study how portfolio size and weighting methods affect performance, keeping the underlying trend indicator and trading rules unchanged.
The results show some interesting trade-offs between concentration, diversification, and portfolio complexity.
Overall, simpler portfolio construction methods remain difficult to beat consistently.
