The following figure shows the rankings of the 30 “best” ETFs from the 100 ETFs in the Hawking asset list. The 30 ETFs were selected based on their rankings in the 3 component lists – US Equities, International Equities and Treasuries/Bonds/Commodities (including metals). Each component list was analyzed using the Cluster Analyzer and the top ranking asset from each cluster was selected for inclusion in this final list. If some clusters were not represented because even the highest ranked asset was not performing better than SHY (i.e. had negative momentum), the highest ranking asset not included in the initial cluster screening was added – thus each component list is represented by 10 assets and some clusters may be represented by more than one asset.
As can be seen from the above figure, all assets are ranked higher than SHY and are potential candidates for inclusion in any portfolio. If a cluster analysis is performed on this list of 30 ETFs, the suggested weightings for a well diversified portfolio of 10 assets (1 asset from each cluster) is as shown below:
The above weightings are based on momentum, but the lists could also be used to populate a Strategic Asset Allocation (SAA) Plan with different weightings.
It can be seen that commodities (UNG and DBA), with negative correlations to equities, are strongly represented in this selection. It should also be mentioned that GLD and IAU had identical rankings in the initial screening analysis, so either ETF could be used to represent Gold, depending on personal preferences.