R2 Screener

What is R2 Screener?

R2 is generally interpreted as the percentage of a fund or security's movements that can be explained by movements in a benchmark index.
An R-squared of 100% means that all movements of a security are completely explained by movements in the index.

Closer the value of R2 is to 1 and much more the security is correlated to the index, that means they will move in the same direction.

Let's consider the S&P500 (SP:SPX) and it's top 10 components by market cap:

NASDAQ:AAPL -> Apple (AAPL): 7.14%
NASDAQ:MSFT -> Microsoft (MSFT): 6.1%
NASDAQ:AMZN -> Amazon (AMZN): 3.8%
NASDAQ:TSLA -> Tesla (TSLA): 2.5%
NASDAQ:GOOGL -> Alphabet Class A (GOOGL): 2.2%
NASDAQ:GOOG -> Alphabet Class C (GOOG): 2.1%
NASDAQ:NVDA -> NVIDIA Corporation (NVDA): 1.8%
NYSE:BRK.B -> Berkshire Hathaway Class B (BRK.B): 1.7%
NASDAQ:FB -> Meta (FB), formerly Facebook, Class A: 1.4%
NYSE:UNH -> UnitedHealth Group (UNH): 1.2%

we will see how each individual stock contribute to the value of the S&P500 used as benchmark, in terms of correlation.

If we continue the analisys we have started in the BETA screener, considering AAPL and MSFT in the period from 28/09/2021 to 08/11/2021 and then to 15/12/2021, we can notice how BETA and R2 works togheter.

In the first period we can notice how AAPL, in red, and MSFT, in blue, are highly correlated to the S&P500, this means that they are trending in the same direction.

In the second period, from 08/11/2021 to 15/12/2021, AAPL start to diverge from the index meanwhile MSFT is stil correlated.

If we analyse all three together, as described already in the BETA indicator, we can catch this divergence and play accordingly.

In the image you can see in the first square the S&P500, in the second square AAPL and on the third MSFT.

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