The SGI European Quality Carry Hedged Index aims to outperform its benchmark by tracking an equity basket selected combining both quality and carry factors from stocks embedded in STOXX Europe 600 Index. Combining the rankings in order to get a better basket leads to more robust results than combining the extremes.
The SGI European Quality Carry Hedged Index aims to replicate a long position in the SGI European Quality Carry Index, hedged with a short position in the Stoxx Europe 600 (the benchmark).
The SGI European Quality Carry Index is based on a 5 step selection methodology applied to the shares comprising the Stoxx Europe 600 index, corrected from stocks with an average daily volume below 3 millions euros. The stocks are ranked according to an average between quality (Piotroski score, Merton's Distance to default) and carry (1-year dividend yield) rankings. The 120 stocks with the highest quality and dividend yield are selected and equally weighted in the index. The rebalancing frequency is quarterly smoothed on 5-business days.