Core Viewpoint - The article discusses the need for factorization of the industry rotation model to adapt to the upward market environment expected from 2025, highlighting the decline in effectiveness of traditional reversal logic factors and the importance of momentum-based factors in stock selection [2][6]. Industry Rotation Model Factorization - The industry rotation model consists of three main categories of factors: fundamental, liquidity, and technical, with technical factors providing unique incremental information that complements traditional stock selection factors [5][6]. - Direct factorization of the industry rotation model is proposed as a superior method, allowing for better performance in upward markets and addressing the challenges of integrating with traditional index enhancement frameworks [6][53]. - The industry momentum factor, when isolated, shows lower correlation with traditional factors, providing additional sources of excess returns and enhancing portfolio performance [22][54]. Performance of Industry Momentum Factor - The industry momentum factor's performance has shown a decline in stability but maintains a good upward trend, with a monthly Information Coefficient (IC) of 3.03% and an Information Ratio (ICIR) of 0.22 [16][54]. - The industry momentum factor exhibits low correlation with other major factors, indicating its potential to enhance portfolio returns and reduce volatility [18][20]. Industry Momentum Domain Perspective - The analysis of different momentum groups reveals significant performance differences among factors, with high momentum groups showing better results for low volatility and reversal factors compared to low momentum groups [25][30][31]. - The industry momentum factor can activate the performance of reversal and momentum factors, leading to improved overall factor performance [39][40]. Comparison of Factorization vs. Industry Deviation Control - The comparison between using the industry rotation model solely for controlling deviations and direct factorization shows that the latter consistently yields better performance [46][50]. - Adjusting constraints to allow for more flexibility in industry momentum groups further enhances the performance of the factorized model [49][51].