Dispersion measures the magnitude of stocks price trends and the differential between bull trends and bear trends. Dispersion is a unique opportunity for active investors using the right data and tools to track and capture trends. Being able to identify in time part of the outperformers while avoiding most of the underperformers can guarantee superior returns on a consistent basis, as dispersion is a broad and recurring phenomenon.

Price trends are the result of the combined impact of buyers and sellers for any specific stock. If the aggregated money flow from buyers exceeds the outflow from sellers on a consistent basis then a bull trend is produced. A bear phase happens when the balance is weighted on the sellers side. But how investors decide to buy or to sell? Understanding this is critical. Some investors can be guided by fundamental analysis. This was a key driver of the past. Today the world is more complex. Investors can be influenced by a variety of motivations including social media influence, rapid shifts in sentiment, fast changing economic changes. The big pools of money controlled by large players as sovereign funds can decide to change the allocation on the basis of ESG and other investment policy considerations. And a growing army of momentum players create and fuel trends up and down. So at the end trends are the result of the combination of several forces at work, where traditional fundamental valuations have a decreasing impact.

If you want to capture trends just analyze and measure trends. Common data and tools are ineffective at discriminating bull vs. bear trends. Conventional methodologies and traditional metrics ignore the actual price action, the only thing that counts to exploit trends. Capturing trends requires specific methodologies that can evaluate and rate trends, objectively differentiating between up and down trends, as any other approach misses the point. The most effective methodologies are based on massively tested and well proven mathematical models, as any human interaction can only be a drag due to potential biases, arguable opinions and tricky emotions.