Rev. Date December 11, 2023
The Two Sigma Factor Lens tab, accessible by clicking on the graduation cap icon at the upper right hand side of the platform , has four sections: Factor Basics, Factor Deep Dive, Factor Insights, and Recent Factor Activity.
1. What does Factor Basics show?
The Factor Basics page offers foundational, general information on risk factors, including what we believe they are and how they can be used. It also provides introductory information on the factor lens that Venn uses: the Two Sigma Factor Lens.
2. What is the purpose of Factor Basics?
Factor Basics’s primary purpose is to educate users on the concept of risk factors and provide an introduction to the factors in the Two Sigma Factor Lens. For more detailed information on the Two Sigma Factor Lens, visit the FAQ.
3. What does Factor Deep Dive show?
The Factor Deep Dive page offers a detailed breakdown of the individual factors in the Two Sigma Factor Lens. It shares the underlying inputs, any residualization steps used in the construction process, and an example of notable performance along with helpful commentary for each factor. This section is also accessible by clicking into the individual factors on the Factor Basics page.
4. What does Factor Insights show?
Factor Insights provides more detail and historical performance information of the factors in the Two Sigma Factor Lens. Factor Performance History shows the cumulative return of the factors in the Two Sigma Factor Lens. Users can select the specific factors they'd like to chart, add a benchmark or portfolio to add to the chart, and also adjust the analysis period. The Characteristics and Correlations tables show the factors' annualized return, volatility and Sharpe along with the pairwise correlations across factors over the analysis period.
5. What does “Show Factor Inputs” do?
This shows the key inputs used to generate the selected factor’s return stream, plus any factor(s) used in the residualization.
6. What are the shaded areas in the cumulative return chart?
The shaded areas represent notable performance time periods for the factor that can be helpful for understanding the factor’s historical performance. Click on the area for commentary related to the notable period.
7. What is the purpose of Factor Insights?
Our primary goal is to highlight certain aspects of factor construction. We hope this page gives users a sense of what each factor is composed of , how it has behaved historically, and how it may differ from common market indices.
Our secondary goal is for Venn to share ongoing factor performance as the market moves. If a portfolio is highly exposed to credit, for example, it can be helpful for users to see how the Credit factor has performed and potentially better assess whether it could contribute to or detract from their portfolio’s performance.
8. What does recent Factor Activity Show?
The Recent Factor Activity dashboard shows recent factor performance and alerts for their movements. Factors will be highlighted when there are moderate or large movements in a factor’s return over the most recent rolling 5 weekday period. Generally, Venn compares a factor’s movement to its average rolling 5 weekday return using historical data going back to October 1997. Movements that are 2 to 3 standard deviations away from the historical mean are registered as “moderate” and those above 3 standard deviations are registered as “large.” Factors will generally remain highlighted for 1 day following any alert.
This document highlights certain aspects of this feature. As an overview, it does not discuss all material facts or assumptions. Please see Important Disclosure and Disclaimer Information.