Report by Trivariate Research

Investors appear increasingly nervous about the strong price momentum in software and semis. This performance has occurred with average volatility vs. history and with declining volatility over the last six months. Trivariate’s analysis reveals how changes in volatility impact subsequent performance. Specifically, it is software volatility that matters the most. Stocks with the biggest change in volatility Q/Q strongly underperform those with decreases in volatility among the group of tech stocks in the highest tertile of CSR (Trivariate has a proprietary seven-factor model to compute company-specific risk). Short ideas include AppFolio, Vertex, CleanSpark and Alkami.