The Omega Point application provides portfolio analysis tools that include describing how a portfolio's factor risk & factor exposure have deviated from their historic values. This is described as a factor's drift and can be found in the right-hand column when using the Analyze: Risk and the Analyze: Exposure modules

Drift is categorized by the following percentile buckets:

Very High: 95% - 100%
High: 75% - 95%
Neutral: 25% - 75%
Low: 5% - 25%
Very Low: 0% - 5%

  • This drift is calculated using data limited to the date range* (1). 
  • Selecting a factor category (2) will display each factor's historic exposure values in the line graph (3) [or a factor's risk decomposition values, when using Analyze: Risk].
  • Given the selected time period, the currently selected date (dashed line) will display that date's exposure in the right-hand column (5), and it's drift.

*When the date range value is less than 3 months, the app automatically uses as many dates as possible to get a statistically significant drift calculation.

Drift Methodology

  1. Find the mean and calculate the standard deviation over the full date range*
  2. Find the difference from today's value from the mean, divided by the standard deviation

    driftValue = (todaysValue - mean) / deviation
  3. The driftValue is then bucketed into it's respective percentile by the following categories

    driftValue < -1.645σ = Very Low
    driftValue < -0.674σ = Low
    driftValue < 0.674σ = Neutral
    driftValue < 1.645σ = High
    driftValue > 1.645σ = Very High
     
    The range [-0.674σ, 0.674σ] represents the range of z-scores that can be mapped for the middle 50% of any set, i.e.
    Neutral: 25% - 75%

    The range [0.674σ, 1.645σ] & [-0.674σ, -1.645σ] corresponds to the next 20% of values falling into their respective buckets
    High: 75% - 95%
    Low: 5% - 25%

    And values that fall above or below +/- 1.645σ correspond to the last 5% of values
    Very High: 95% - 100%
    Very Low: 0% - 5%
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