Brazilian Intramarket Relationships: Relative Strength as Regime Information in an Emerging Market
Year: 2026
Type: article
Abstract: Radar Perene Working Paper Series, No. RPWP-101 · Version 1.0 · July 2026 A large practitioner and academic literature studies intermarket relationships — the co-movement of stocks, bonds, commodities, and currencies — and intramarket relationships — the relative strength of one market segment against another — as sources of information about the prevailing market regime. Almost all of that literature is written about the United States, and almost all of it is silently assumed to generalize. This paper documents that the assumption fails in Brazil, and it fails in an instructive way. The canonical United States playbook treats a financial sector outperforming the broad index as a signal of easy money and expanding risk appetite. In Brazil the logic runs in the opposite direction: the profitability of the large listed banks is materially supported by high policy rates, which widen spreads and remunerate large low-risk asset books, so financial-sector relative strength has historically accompanied tightening cycles and defensive conditions rather than easing cycles and risk expansion. The financials-versus-index ratio is, in the terminology of this paper, risk-inverted relative to the logic built around XLF — the flagship United States financial-sector exchange-traded fund — that dominates the imported literature. Building on this observation, the paper proposes a taxonomy of Brazilian relative (ratio) relationships organized by economic category — financials, utilities, commodity producers, listed real-estate income vehicles, consumer cyclicality, and cross-asset ratios expressed in local currency — and describes how the Radar Perene research program aggregates a curated set of such relationships into a daily composite indicator of domestic capital flow, mapped to a 0–100 scale with published regime bands. The paper describes the construction philosophy at the level of categories and normalization families; proprietary weights, exact component lists, and tickers are not disclosed. The measure is descriptive: a high reading indicates that capital inside the Brazilian market is rotating toward historically risk-seeking segments relative to the index's own history; a low reading indicates rotation toward historically defensive segments. The indicator does not forecast index direction, does not identify tops or bottoms, and is not investment advice. Validation is reported honestly, with all statistics verified against the program's production database as of July 2026 and printed alongside the index's unconditional forward baseline: a documented data-integrity incident found and corrected in 2026, hit rates with their failure complements and asymmetries, an explicit statement that the financials backtest asymmetry is consistent with the inverted-transmission reading but equally consistent with a mechanical alternative (a low-beta banking sector plus nominal index mean reversion) that the current design cannot separate, and a candid treatment of multiplicity, look-ahead, survivorship, concentration, and stationarity limitations inherent to reconstructed sector baskets in a market with a short modern monetary history. The paper's central contribution is the taxonomy and its transmission-channel analysis, which rest on documented institutional facts; the backtest statistics are supporting descriptive evidence, not proof of the inversion. This is a living document: future versions may expand datasets, validation procedures and historical coverage without changing the conceptual foundations. All validation statistics were verified against the Radar Perene production database as of July 2026. The concept DOI (10.5281/zenodo.21327663) always resolves to the latest version.
Author: Silva, Luiz F. Nunes da
Institution: Radar (United States)
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7168137072
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