Discussing the article: "Market Positioning Codex for VGT with Kendall's Tau and Distance Correlation"
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Check out the new article: Market Positioning Codex for VGT with Kendall's Tau and Distance Correlation.
In this article, we look to explore how a complimentary indicator pairing can be used to analyze the recent 5-year history of Vanguard Information Technology Index Fund ETF. By considering two options of algorithms, Kendall’s Tau and Distance-Correlation, we look to select not just an ideal indicator pair for trading the VGT, but also suitable signal-pattern pairings of these two indicators.
The VGT, unlike more diversified ETFs that often sprinkle tech exposure over various sectors, is unabashedly concentrated. This ETF does not ‘dilute-conviction’ - but rather it bottlenecks it. The consequence of this is that it tends to move rapidly in either direction. Said differently, whenever the NASDAQ sneezes, the VGT either catches a cold or rallies like it discovered a new potent vaccine. In essence, the way VGT is set up, volatility is not a bug but rather a premium one pays for potential outperformance. As Warren Buffett once said, diversification is the enemy of performance.
Launched in 2004, the VGT growth trajectory has almost been a reflection of the digital revolution itself. Starting with web-2.0 infancy all the way to AI’s industrial adolescence, VGT has basically compounded alongside every major technology milestone. Its rock bottom expense ratio also provides a structural edge that allows most of the equity gains to flow towards the investor rather than the fund manager’s coffers.
With that said, there is increasingly a growing sense that trading the VGT is not primarily about being bullish or bearish, but rather about timing rotations within the technology sector’s internal ‘weather-system’. VGT’s behavior tends to vary across seasons, quarters as well as macro cycles. This leads us to our next section, which is what to look out for, heading into 2026 as this theme not only appears relevant but arguably critical.
Author: Stephen Njuki