Risk Model
Galedge's 21-factor risk model decomposes stock returns into systematic factors, helping you understand what drives portfolio risk and return.
21-Factor Risk Model
The risk model uses cross-sectional regression to estimate factor exposures and factor returns. Each day, stock returns are regressed against factor exposures to compute factor returns. Over time, this builds a complete picture of what drives your portfolio.
Market Factor (1)
| Factor | Description | Interpretation |
|---|---|---|
| BETA | Sensitivity to overall market | High beta = moves more with market |
Style Factors (10)
| Factor | Description | High Exposure Means |
|---|---|---|
| SIZE | Market capitalization | Large-cap stock |
| MOMENTUM | Recent price trend (6-12 months) | Strong recent performer |
| VALUE | Price relative to fundamentals | Cheap stock (low P/E, P/B) |
| VOLATILITY | Historical return volatility | More volatile stock |
| QUALITY | Profitability and stability | High-quality, profitable company |
| GROWTH | Earnings/revenue growth rate | Fast-growing company |
| LEVERAGE | Debt-to-equity ratio | Highly leveraged company |
| LIQUIDITY | Trading volume relative to market cap | Highly liquid stock |
| DIVIDEND_YIELD | Dividend as % of price | High-dividend payer |
| EARNINGS_YIELD | Earnings as % of price (inverse P/E) | High-earnings yield (cheap) |
Industry Factors (10)
Industry factors capture sector-specific risk. Each stock belongs to one industry. The 10 industry factors are:
Factor Summary Page
Navigate to Risk Model → Factor Summary. Select a model (e.g., INEC1 for Indian equities).
What You See
- Factor Performance Table — CAGR, cumulative return, Sharpe ratio, daily return, max drawdown for each factor
- Factor Correlation Matrix — heatmap showing how factors correlate with each other (green = positive, red = negative)
- Factor Returns Time Series — cumulative return chart for top factors over time
- Factor Pair Selector — select any two factors to see their exact correlation value
Auto-build:If the risk model hasn't been built yet, the page automatically triggers a build. This uses cross-sectional regression across all available stock data and takes 1-2 minutes.
Stock Factor Exposures
Navigate to Risk Model → Stock Summary to see individual stock exposures to all 21 factors.
How to Read Exposures
Factor exposures are standardized scores (z-scores). A value of:
| Value | Meaning |
|---|---|
| 0.0 | Average exposure (neutral) |
| +1.0 | One standard deviation above average (strong positive tilt) |
| -1.0 | One standard deviation below average (strong negative tilt) |
| +2.0 | Very high exposure (top percentile) |
Example: If RELIANCE.NS has a MOMENTUM exposure of +1.5 and a VALUE exposure of -0.8, it means Reliance has strong recent performance (momentum) but is relatively expensive (low value tilt).