The Axioma Worldwide Equity Factor Risk Model offers faster detection of market shifts and stock group rotations, SimCorp says.
SimCorp, a provider of investment management solutions, has released the next generation of its Axioma Worldwide Equity Factor Risk Model, which has been designed to help portfolio and risk managers build portfolios that can better cope with market volatility, officials say.
“By combining SimCorp’s proprietary research on factors with the latest academic findings on factor effectiveness, the model assists investors in uncovering hidden portfolio risks,” according to the announcement. “It maintains the ease of use characteristic of a parsimonious model while featuring improved volatility calculation methodology. These enhancements allow faster detection of abrupt market direction changes or significant rotations between stock groups.”
Conventional factor risk models can miss critical exposures affecting portfolio performance, “the Axioma Worldwide Equity Factor Risk Model is designed to help portfolio managers construct better and more resilient portfolios, drawing on the latest research on factor effectiveness,” says Melissa Brown, head of investment decision research at SimCorp in a prepared statement.
The Axioma Worldwide Equity Factor Risk Model introduces several new factors for current market environments. “One of these is the Non-linear Residual Factor, which uses machine learning to uncover hidden factor interactions not detected by a standard linear model. The identification of higher-order relationships between factors gives managers additional explanatory power to what was once considered residual risk,” officials say.
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