# Factor Drift Methodology

## Automatic calculations display how a factor's current risk & exposure sizes up against its historic values

The Omega Point application provides portfolio analysis tools that include describing how a portfolio's factor risk & factor exposure have deviated from their historic values. This is described as a factor's **drift** and can be found in the right-hand column when using the Analyze: Risk and the Analyze: Exposure modules

Drift is categorized by the following percentile buckets:

Very High: 95% - 100%

High: 75% - 95%

Neutral: 25% - 75%

Low: 5% - 25%

Very Low: 0% - 5%

- Drift is calculated for the specified date range

— when the date range value is less than 3 months, the app automatically uses as many dates as possible to get a statistically significant drift calculation. - Selecting a factor category will display historical factor exposure values [or a factor's risk decomposition values, when using Analyze: Risk].
- Dynamically interact with the graph, and introspect any particular date (dashed line), then...
- Display that date's weighted-average factor exposures in the right-hand column, and it's drift (red, blue arrows).

## Drift Methodology

- Find the mean and calculate the standard deviation over the full date range*
- Find the difference from today's value from the mean, divided by the standard deviation driftValue = (todaysValue - mean) / deviation
- The driftValue is then bucketed into it's respective percentile by the following categories

driftValue < -1.645*σ*= Very Low

driftValue < -0.674*σ*= Low

driftValue < 0.674*σ*= Neutral

driftValue < 1.645*σ*= High

driftValue > 1.645*σ*= Very High

The range [-0.674*σ*, 0.674*σ*] represents the range of z-scores that can be mapped for the middle 50% of any set, i.e.

Neutral: 25% - 75%

The range [0.674*σ*, 1.645*σ*] & [-0.674*σ*, -1.645*σ*] corresponds to the next 20% of values falling into their respective buckets

High: 75% - 95%

Low: 5% - 25%

And values that fall above or below +/- 1.645*σ*correspond to the last 5% of values

Very High: 95% - 100%

Very Low: 0% - 5%