What strategy does Alphalens use to calculate the 1-day, 5-day, and 10-day alpha and beta values?

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What strategy does Alphalens use to calculate the 1-day, 5-day, and 10-day alpha and beta values?

posted Jan 10, 2018

Seeking Help Getting Started

Hi,

My question is as in the title.

Is the 5-day strategy, for instance, to go long on quantile 5 and short on quantile 1 (assuming 5 quantiles), and rebalance every 5 days?

Thanks for any help,

Jack

3 responses

Have a look at:
- question-about-periods-parameter-and-how-it-works-in-alphalens
- alphalens-what-does-it-do

Those should help answering your question. If not, please keep posting :)

Hi Luca thanks for the links - they've cleared lots up for me. I still have a couple of questions though.

For the 1-period forward return information coefficient chart, is the IC on any date evaluated by finding the correlation between the factor values of the stocks on the date and the returns of the stock on the subsequent day?

Also for the factor-weighted long-short portfolio cumulative return chart, are just the stocks in quantiles 1 and 5 traded?

Thanks,

Jack

For the 1-period forward return information coefficient chart, is the
IC on any date evaluated by finding the correlation between the factor
values of the stocks on the date and the returns of the stock on the
subsequent day?

Exactly and the Spearman rank correlation coefficient is used.

Also for the factor-weighted long-short portfolio cumulative return
chart, are just the stocks in quantiles 1 and 5 traded?

Actually all of them, but you can see the quantile specific performance in the Cumulative Return By Quantile plots.

Also have a look at the examples, especially the ones with synthetic data might help you fully understand Alphalens, just build your own dataset and see the results.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.