A platform to instantly validate your investment intuitions

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Building and analyzing factors/signals can be a daunting task if all you need is to validate your ideas or intuitions.

Having managed a quant hedge fund, we have dealt with the pain of defining and building such signals over decades. We built the Finsera platform to use the power of cloud and to make signal development as simple as it can be for all.

To illustrate that, we take an example of the technology sector that has been much in the news over the last decade. It might be tempting to think that investing just in technology might be the way to an Alpha. But how would you quantify and refine that intuition?

If you have done portfolio construction, you would know the amount of data, data cleaning, scripting and processing you would need just to compute a plausible return on investing with this idea.

Below we use the Finsera platform to build a growth signal over the technology sector in the US.


Universe construction

Below is a Universe consisting of technology sector assets with a Market Cap >$100m trading in the US market. The chart on the right shows the coverage of this Universe over the last 10 years.

Universe definition
Total coverage

As one can see the universe consists of several hundred names with a significant increase in names following the run-up in the market after the spring of 2020.


Signal

Next, we evaluate the sales growth signal as a measure of attractiveness for technology names. Specifically, we utilize Finsera’s proprietary intent-based code expressions to build a test portfolio that is long high growth names and short low growth names.

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Computing Returns

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To compute the returns, we generate an analysis report that is configured as shown here.

As you can see, we standardized the data and computed a simple portfolio using the predefined filters available on the Finsera platform.


Analysis / Conclusion

We generated the analysis report (which was completed in less than a minute), and here is one of the charts to analyze the performance.

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As one can see, while at certain periods betting on growth can generate nice returns, there can be long periods where the signal is flat or if we look at recent periods, at times, growth may perform very poorly.

This note is meant as an initial introduction to how investment ideas can be quickly evaluated using the Finsera platform. In follow-up notes we will show how the platform can be utilized to further refine the initial thesis, resulting in more consistent returns over time.

As you can see, with minimal intent-based code expression and a web-based UI, we were able to put together a simple strategy in an instant and compute the returns in minutes using the power of the cloud.