Portfolio Performance Techniques - Neutralization

If your portfolio is not performing well despite having a good model you can try to change the sector and region weights.


Neutral on

Region/Sector neutral: The portfolio will be constructed as a series of portfolio - each matching the market cap weighting each of the stock universe 'regions' or 'sectors'. This means that min. and max. number of stocks 'per portfolio' becomes 'per region' or 'per sector'.

The region or sector neutral spread is how far away from the benchmark region or sector allocation the machine can deviate. This is adjusted for net exposure, i.e. if your net exposure is 0% the target region or sector allocations will be 0%.