Model Evaluation - Quantile Spread

The most important thing in creating a good model is the quantile spread, the grouping of stocks based on the goal you selected in the model building process (alpha or raw return).

Q1 represents the stocks that the machine believes will perform the best (top 20% of stocks) while Q5 represents the stocks that the machine believes will perform the worst (bottom 20% of stocks).

Typically, Q1 is good for long positions while Q5 is good for short positions. 

Generally speaking, a good model will have descending quantiles from Q1 to Q5 and a good spread between Q1 and Q5.