The Related Business Risk factor occurs when two or more companies’ earnings are affected by the same fundamental drivers. Specifically, the process of identifying, grouping, and diversifying across related business risk is called stratification.
Consequently, the portfolio is broken down into eight broad sectors, including consumer, energy, financials, food, health care, industrials, information and information tools. Components are then “equally allocated” across those sectors, and rebalancings of the index occur on a quarterly basis.
SSPY aims to provide exposure to the “same stocks as the S&P 500, providing access to constituents that are the leading proxy for the market,” and it is “reweighted to diversify related business risk and provide a more balanced exposure than cap-weighting,” according to Syntax.
Current top holdings include Yum Brands (NYSE: YUM) 0.8%, Walmart (NYSE: WMT) 0.8%, Costco Wholesale (NYSE: COST) 0.8%, McDonalds (NYSE: MCD) 0.8% and Sysco (NYSE: SYY) 0.8%.
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