Where Data Tells the Story
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Of all the potential reasons to form an investment idea, none is simpler than the core tenet behind momentum: stocks that have gone up tend to keep going up.
It is, perhaps, the most beautiful of all investing strategies. Beloved by everyday retail traders and some of the most complicated quantitative investing firms on the planet — the type that only employ physics Ph.D.s — momentum was an intuitive idea that became a statistical curiosity when the phenomenon was first posited in academic literature in the 1990s, and it’s been blowing up portfolios, and making others rich, ever since.
And it is having an incredible year so far.
Per data from Bloomberg’s PORT MAC3 model, which tracks a swath of factors and risk premia, a long-short portfolio of US high-momentum stocks — effectively “buying” the stocks that have already gone up a lot, while simultaneously betting against the ones that have been weaker — has gained 10.5% this year. That’s the most of any of the traditional style factors.
See the full article here.