Cross-Sectional Momentum

Cross-sectional momentum, or relative momentum, involves ranking a group of assets based on their past performance and selecting the top performers to buy while selling the bottom performers. Unlike time-series momentum, this strategy is always fully invested in the market, focusing on the relative strength between assets.

It relies on the assumption that assets that have outperformed their peers will continue to do so in the near future. This is a common strategy for portfolio managers looking to optimize their crypto holdings by constantly rotating into the strongest narratives or sectors.

It requires frequent rebalancing to ensure the portfolio always holds the assets with the highest relative strength. This method is highly sensitive to the choice of assets included in the universe and the ranking period.