Concepts
Reference encyclopedia for quant building blocks: vol targeting, position sizing, overfitting, regime detection, and more.
Correlation Clustering
Grouping assets or signals by correlation structure to manage diversification and risk.
riskdiversificationclusteringDrawdown
The peak-to-trough decline in portfolio value; key risk metric for live and backtest.
riskevaluationmonitoringMean Reversion
The tendency of prices or returns to revert to a long-run average after deviations.
signalsequitystat-arbMomentum
The tendency of assets that have performed well (poorly) to continue performing well (poorly) over the next period.
signalstrendcross-sectionalOverfitting
Fitting a model or strategy so closely to historical data that it fails out-of-sample.
backtestingevaluationmachine-learningPCA (Principal Component Analysis)
Dimensionality reduction by projecting data onto orthogonal directions of maximum variance.
factor-modelsdimensionality-reductionriskPosition Sizing
Rules for how much capital to allocate per trade or asset (equal weight, risk parity, Kelly, etc.).
riskportfolio-constructionRegime Detection
Identifying and adapting to different market states (trending vs mean-reverting, risk-on vs risk-off).
risksignalsadaptationShrinkage
Pulling estimates (e.g. mean, covariance) toward a prior or global average to reduce estimation error.
estimationcovarianceportfolio-constructionTransaction Costs
Slippage, spread, commission, and market impact that reduce strategy returns in practice.
implementationbacktestingliquidityVol Targeting
Scaling portfolio exposure so that realized volatility stays near a target (e.g. 10% annual).
riskposition-sizingleverageWalk-Forward Analysis
Out-of-sample testing by rolling a training window forward and evaluating on the next period repeatedly.
backtestingoverfittingevaluation