iQ Canada Sensitive Super Sector Model
The iQ Canada Sensitive Super Sector Model focuses on a specific part of the market—companies that tend to move with the economy, but not to extremes.
These are businesses in Communication Services, Energy, Industrials, and Technology—sectors that participate in growth when conditions are good, but typically avoid the sharp swings seen in more cyclical areas. Most of these companies carry betas close to 1, meaning they generally move in line with the broader market rather than far above or below it.
The model builds a portfolio within this “middle ground,” combining stability with participation.
Investment Objective
The objective is to generate long-term returns above the S&P/TSX Index while taking on less downside risk, by focusing on companies that move with the market but avoid extreme volatility.
The model targets stocks that:
Sit within economically sensitive but not highly cyclical sectors
Exhibit controlled volatility
Show evidence of strength and momentum
Maintain broad market exposure without excessive swings
Investment Process
Step One — Focus on the sensitive sectors
Start with all Canadian-listed common stocks within Communication Services, Energy, Industrials, and Technology.
Step Two — Top companies by size
From that group, rank by market capitalization and keep the top 30. This ensures the model focuses on larger, more established companies.
Step Three — Strategy One: Lower volatility
From those 30, rank by 5-year beta and keep the 10 lowest. This identifies companies that have historically moved more steadily with the market.
Step Four — Strategy Two: Strong momentum
Separately, from the same top 30, rank by relative strength (RSI) and keep the top 10. This identifies companies showing stronger recent price performance.
Step Five — Combine and score
Both lists are combined, and each stock is scored based on its ranking in each strategy. Stocks that appear in both lists are favored.
Step Six — Final selection and equal weight
Select the top 10 overall stocks based on combined scores and allocate evenly across the portfolio.
The model reconstitutes on a seasonal quarterly schedule—February, May, August, and November.
Potential Benefits
This model sits in a part of the market that is often overlooked. By focusing on sectors with betas near 1, it avoids the extremes—neither too defensive nor too aggressive. That positioning can help the portfolio stay engaged in market upside while avoiding some of the sharper drawdowns that come with more volatile sectors.
The use of two independent strategies—one focused on lower volatility and the other on momentum—creates a balanced selection process. It is not just looking for stability or just chasing strength. It is looking for companies that offer both. When a stock ranks well across both measures, it tends to reflect a more durable trend.
By limiting the universe to larger companies and applying a structured scoring system, the model keeps the portfolio focused and intentional. The equal-weight approach ensures that each position contributes meaningfully, rather than allowing a few names to dominate outcomes.
Potential Risks
This model’s structure can also lead to tradeoffs. By focusing only on sensitive sectors, it excludes both defensive areas like utilities and more aggressive cyclical industries. If leadership shifts outside of this group, the model may lag.
The balance between lower-beta stocks and momentum can also create tension. In strong, high-beta rallies, more aggressive stocks may outperform, leaving this model behind. On the other hand, in sharp downturns, even “moderate” sectors can still decline, and the model is not designed to fully avoid market exposure.
The reliance on a scoring system means the model favors stocks that check multiple boxes, but it may miss opportunities that are strong in one dimension but not another. As with any concentrated portfolio, individual stock performance matters, and a few underperformers can impact results.
Finally, the model updates on a set schedule, not continuously, which means it can remain exposed to changing conditions between reconstitution periods.
Bottom Line
This is a targeted Canadian equity strategy focused on the market’s middle ground.
By combining sector positioning, lower volatility, and momentum, it aims to capture market participation with a more controlled experience than broader or more aggressive approaches.