How to use it

Discretionary Management

Discretionary portfolio management is full of traps and pitfalls.

Behavioral traps include:

  • The disposition effect – selling winners too early and holding on losers too long. The opposite – let profits run and cut losses short – is a winning attitude, but strong mental discipline is required. This is not for everyone and here is where the contribution of objective, proven trend analytics can make a difference in generating alpha.
  • Attachment to positions that do not perform, excessive confidence on fundamental metrics are another problem. How often price action of a stock is disconnected to whatever fundamental value has been assessed. Fundamentals alone may not be enough to generate superior performance on a consistent basis. The performance statistics of mutual funds are a strong evidence of this disconnections as the large majority of funds, most of them purely fundamentals-driven, underperform the benchmarks. This is where a “reality check” can be the smart choice, where assessing the quality of the real price trend together with the value of a stock can enhance the performance of a strategy. Taking the best of both worlds is intelligent, good practice.
  • With Trendrating you can count on a proven, well validated methodology that provides you with an edge in identifying and measuring those trends that can make a difference in your yearly performance
  • Validate investment ideas and research recommendations
  • Screen the market and find investment opportunities
  • Monitor portfolio risks by quickly spotting underperformers
  • Use the rating to fine tune the exposure in stocks and sectors
  • Be alerted on trend reversals
  • Synch your investment strategy with real trends
  • Measure the contribution in terms of extra performance
  • Save time

Systematic Management

Systematic portfolio management is gaining traction as it often provides better returns, lower deviations from expected outcome, improved control, full transparency and lower costs.

However the performance of a systematic strategy over time is as good as the models used.

The best practice suggests using models that have been massively tested across at least 6 different market cycles and on different equity markets and a large statistical sample of securities.

Then the models must be easy to understand, transparent (no black box / AI mystery) and actionable.

Trendrating model ticks all those boxes:

  • Tested in sample on 20 years of daily data (…1988-2008) for 15,000 listed securities on 10 markets.
  • Validated out of sample on 5years of data (…2009-2014)
  • Live and used by our customers since 2014
  • Built on a sophisticated pattern recognition algorithm with transparent rules
  • Uses self-adjusting time windows for more accurate results
  • Generates an easy to use rating methodology where A and B rated stocks tend to outperform those rated C and D .

The Trendrating solution consists of:

  1. A proprietary, sophisticated model to generate alpha via a more effective trend capture 
  2. A software based on a high performance engine to leverage the model via building, testing, optimizing and managing an investment strategy
  3. A data feed that can be easily ingested by proprietary or third party software applications
  • Trendrating solution is based on a “pattern recognition” algorithm that processes a large volume of data.
  • The algorithm works on a multi-factor analysis and uses a self-adaptive, flexible time window. When the different factors are in synch there is a high probability that a relevant trend is in place. The dynamic time window enables a more timely identification of an emerging trend and the multi-factor approach supports an effective filtering of price noise , short term volatility and false moves.
  • Trendrating provides advanced analytics designed to capture trends, identifying most of the winners and avoiding a large part of the losers with in a yearly horizon. Our model offers a unique rating of trends where A and B indicate a bull trend and C and D mark bear moves. We provide a unique edge where A and B rated stocks on average outperform those rated C and D.
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