Axioma US Equity Factor Risk Model: Trading Horizon

Version 5.1

Portfolio risk management for shorter investment horizons

The Trading Model provides accurate portfolio risk exposures and forecasts for trading horizons, better capturing the short-term impact of rapidly changing market conditions.

Ultra-short term factors

Version 5.1 of the Trading Model includes One-Day Reversal and three new factors not found in the previous Trading Model (Version 5.0).

An additional horizon

The suite of Axioma US Equity Factor Risk Models also includes short-horizon, medium-horizon, statistical and fundamental variants.

FACTSHEET

The US Axioma Trading Horizon Model (US5.1)

When the market abruptly and sharply changes direction, you need an ultra-short risk model that helps you better understand and manage that risk.

GET FACTSHEET

Who is the Trading Model for?

Hedge fund managers

Quantitative asset managers

Algo traders

Sell-side managers

Risk managers

Structuring desks

Key benefits

Get daily insights

Capture the day-to-day changes in risk of the trading book and other portfolios with short investment horizons

Manage high-frequency strategies

Accurately capture risk/return trade-offs for fast moving alpha signals and high turnover strategies

Rebalance with confidence

Understand the trade-off between risk and market impact/slippage and improve portfolio implementation and execution

Understand risk drivers

Get insights into the event-driven risk stemming from earnings announcements, short-squeezes and other infrequent events

Trading Model US5.1: Factor highlights

One-Day Reversal (unique to Trading Horizon)
Captures the risk and return of stocks based on the previous day’s return. This factor is particularly relevant to capture risk in short-horizon strategies that rebalance daily.
Opinion Divergence (new)
Measures lack of consensus among investor opinion, based on unusual trading volume. Because uncertainty depresses prices, stocks with high exposure tend to outperform as news arrives.
Non-linear Residual (new)
Finds higher-order explanatory factors in the residual returns, akin to a neural net but with greater transparency. This factor can adapt to otherwise hidden risk exposures.
Investment (new)
Measures the combination of asset growth, sales growth and inventory growth. Stocks with high exposure tend to underperform, as overinvestment often fails to produce expected profits.
Downside Risk (modified)
Accounts for negative or uncompensated risk and includes as components 20-day downside volatility (shortened from 60 days), maximum return (for mean reversion) and implied volatility spread (for unexpected volatility risk).