ETF Trend Metrics Explained: SMA, Beta, Sortino and Z-Score

Every Quantlake ETF trend report quotes the same measures: a 10-month moving average, beta, realized volatility, a Sortino ratio, a z-score. This page defines each one and states what it does not tell you, then shows the numbers on live data.

Every Quantlake ETF trend report quotes the same set of measures. This page defines each one, what it is calculated over, and what it does not tell you.

Trend measures

How the reports decide whether a fund is in an uptrend, and how stretched that trend is.

10-month moving average (SMA)

A long-term trend filter popularized by Meb Faber's tactical asset allocation research. It averages the trailing 10 months of closing prices. Price above the line points to a structural uptrend; price below points to a downtrend.

SMA slope

The rate of change in the moving average line itself over a specific timeframe (such as three months). A flat slope confirms a trendless consolidation; a steepening slope confirms that trend momentum is accelerating.

Z-score

A statistical measure showing how far a current price or ratio sits from its own 3-year rolling average, measured in standard deviation units. Readings beyond ±2 are statistically unusual; whether the data point reverts to the mean or continues to stretch depends on whether the prevailing trend is intact or weakening.

Relative strength measures

How a fund is measured against the S&P 500, in return terms and in sensitivity terms.

Excess return

The fund's net return minus the S&P 500's return over an identical timeframe. This is cumulative over each specific window (1M, 3M, 6M, 12M) and is not annualized. It serves as the baseline measure for relative strength.

Indexed to 100

A method of rebasing the fund-to-S&P 500 ratio to a fixed reference date (such as June 2021 = 100) to make relative changes easier to read. Today's value reads directly as the cumulative percentage change in relative strength since that anchor. A reading of 115 means the fund has beaten the market by 15% since the starting date.

Beta

A measure of an asset's co-movement with the S&P 500. A beta of 1.0 means the fund moves roughly in step with the market average; above 1.0 means it tends to swing harder than the market in both directions; below 1.0 means its swings are dampened. Beta measures market sensitivity, not the independent size of the fund's own price swings (which is volatility).

Risk measures

How much a fund moves, how well it pays for that movement, and over what window.

Realized volatility

The standard deviation of a fund's actual monthly returns over a trailing 1-year window, multiplied by the square root of 12 to express it as an annual figure for easier comparison. Higher percentages imply wider price swings.

Sortino ratio (Downside efficiency)

A risk-adjusted performance measure that only penalizes negative swings (losses) rather than general volatility. It measures the excess return earned per unit of downside risk. As a rough guide, readings above 1.0 are solid and above 2.0 are strong, though thresholds vary by asset class. Reported on a 3-year rolling window as the full-cycle benchmark.

Lookback window

The specific historical timeframe used to calculate a metric (such as the 1-year and 3-year windows). Shorter windows are highly sensitive to recent momentum shifts; longer windows smooth out noise but blend together multiple market environments.

Macro measures

How a fund relates to rates and the dollar, and when that relationship helps or hurts.

Correlation

A mathematical value from -1.0 to +1.0 measuring the consistency and direction of co-movement between two assets. +1 means they move in lockstep; -1 means they move in opposite directions; 0 means no consistent relationship. Correlation describes the direction and consistency of the move, not the absolute size of the price impact.

Headwind / Tailwind

An assessment of whether the macro environment is currently working for or against a fund. It is built from two distinct inputs: (1) how the fund correlates with a macro asset like Treasuries (TLT) or the US Dollar (DXY), and (2) whether that macro asset is itself in an absolute uptrend or downtrend. A fund positively correlated with bonds gets a tailwind when bonds are rising and a headwind when bonds are falling. A fund negatively correlated experiences the exact inverse.

What these measures do not cover

Every figure here is trailing: it describes what has already happened, not what happens next. Volatility, correlation and beta all drift with the regime, so a three-year reading blends more than one environment. A trend filter marks the direction a fund has been travelling; it carries no view on whether that direction persists.

These measures on live data

The table below applies the definitions above to real prices over a trailing 3-year window, against a 3.9% risk-free rate (BIL trailing 3-month T-bill yield, as of August 28, 2026). It refreshes monthly, so the levels move while the definitions do not.

US sector ETFs

Over the trailing 3 years, SPY (S&P 500) led the US sector ETFs on risk-adjusted return with a 1.17 Sharpe, and it also holds the best Sortino at 1.72.

Frequently asked questions

Related

• SPY vs RSP: cap-weight vs equal-weight
• GLD vs GDX: bullion vs miners
• MTUM vs QUAL: momentum vs quality
• Compare ETFs with the Sharpe ratio
• Compound interest calculator with volatility, inflation and fees