A Trend Following Deep Dive: Cash (Equities) Is King

Man Group

Yash Panjabi

Research

18 Pages

Man Group examines how cash equities can broaden trend-following beyond equity index futures. The paper argues that directional sector trend still behaves too much like equity beta, with a 0.81 average rolling correlation to index trend, while cross-sectional sector and style approaches produced much lower correlations and more differentiated drawdown behavior.

Key Takeaways

Sector beta problem: Directional sector trend averaged a 0.81 rolling 24-month correlation to equity index trend from 2005–2026.
Diversification improves: Cross-sectional sector and style trend averaged roughly 0.05 correlation to equity index futures, versus 0.81 for directional sectors.
Style trend leads: Style trend posted a 15.4% annualized return and 1.0 information ratio, versus 9.7% and 0.65 for equity index futures trend.
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