The factor roster is the fixed set of 14 reference market series a strategy's returns can be compared against: the broad equity market, size and style tilts, government and corporate bonds, gold, real estate and volatility indices. A factor is not an investment or a benchmark you are scored against; it answers what has this strategy actually behaved like?
Also seen as: factors, reference factors, factor set
How does Fincanva handle it?
A Combined's analysis includes a correlations page whose second table sets each strategy, and the Combined itself, against six of the fourteen factors — Market (S&P 500), 10y Treasury, Investment Grade Corporates, Gold, Real Estate (REIT) and VIX — the ones that disagree with each other. The other eight largely repeat one of the six over a portfolio: the size and style factors move closely with Market, the 3m T-Bill is cash-like and sits near zero against everything, and MOVE and the VIX 1M-3M Spread are second-order volatility gauges beside the VIX.
The table reports two readings of each pair — the correlation, and the adjusted beta where one can be read — and is scoped by the same period selector as the correlation matrix beside it, whose page documents the page's shape and the plan level that includes it. A strategy that correlates strongly with Gold has behaved like a gold position over the period, whatever its tickers and rules — a question its instrument list often answers badly.
Which factors are in the roster?
All 14 factors are active, so any of them can appear in a comparison.
| Factor | What it stands for |
|---|---|
| Market (S&P 500) | the broad US large-cap equity market |
| Small Cap | smaller-company US equity |
| Mid Cap | mid-sized-company US equity |
| Large Cap | large-company US equity |
| Value | the value style tilt |
| Growth | the growth style tilt |
| 10y Treasury | ten-year US government bonds |
| 3m T-Bill | three-month US government bills, the cash-like short end |
| Investment Grade Corporates | investment-grade corporate bonds |
| Gold | gold |
| Real Estate (REIT) | listed real estate |
| VIX | implied volatility of S&P 500 options — the "fear index" |
| VIX 1M-3M Spread | the gap between one-month and three-month implied volatility: how front-loaded market stress is |
| MOVE | implied volatility of US Treasury options — the bond-market VIX |
The series are built from market data supplied by multiple established data providers; Fincanva does not publish which instrument or series stands behind each factor. Like the special data series, factors are reference series a strategy cannot hold. Market (S&P 500) and Large Cap overlap heavily, because the S&P 500 is predominantly large-cap: read them as closely related, not independent.
What does a factor correlation tell me?
How closely a strategy's period-to-period returns tracked the factor's, from −1 to +1 — the scale a correlation matrix reports pair by pair. A +0.7 with Gold means the strategy tended to rise when gold rose and fall when it fell — worth knowing even if it holds no gold, because what it holds responds to the same forces. Near 0, the two moved largely unrelated; −0.6, it tended to move opposite to gold.
Three limits keep that reading honest. Correlation is about direction, not size: a +0.9 with the Market says the strategy moved with the market almost every period, not by how much — that is what beta and adjusted beta measure. Correlation is not causation: a strategy can correlate with Gold because it holds miners, because it reacts to the same interest-rate news, or by coincidence over a short window. And a correlation is only as stable as its period, which is why a rolling correlation says more than a single figure.
Fincanva does not tell you which factor exposures to hold or avoid — see Is this financial advice?.
Why do the volatility factors read differently?
The three volatility factors — VIX, the VIX 1M-3M spread, and MOVE — are index levels rather than prices, so a comparison against them reads changes in the level rather than percentage returns. A strategy whose returns correlate negatively with changes in VIX tended to lose ground when market fear rose, which is the ordinary behavior of a long risk position. The other eleven factors are price-like series compared on returns in the normal way. It is also why the comparison table shows no beta against a volatility factor: a beta measured on a change in a level has no unit anybody can read, so those cells stay empty while the correlation beside them is still reported.