diff --git a/quant-score-v2.mdx b/quant-score-v2.mdx new file mode 100644 index 0000000..bb98b7b --- /dev/null +++ b/quant-score-v2.mdx @@ -0,0 +1,80 @@ +--- +title: 'Adjusted Quant Score v2' +description: 'Detailed breakdown and Excel implementation for evaluating stocks' +--- + +This document outlines the adjusted quantitative scoring model (Quant Score v2) for evaluating stocks and provides guidance on implementing it in Microsoft Excel. + +## Components and Weights + +1. **Financial Health (40\%)** + • **P/E Ratio Score** – normalized relative to the industry average. + • **Debt-to-Equity Score** – inverse of leverage; lower values receive higher scores. + • **Free Cash Flow Yield Score** – free cash flow divided by market capitalization, scaled to a 0–1 range. + All three metrics are averaged to obtain the Financial Health score. + +2. **Market Sentiment (30\%)** – subdivided into: + • **Fund Flows / ETF Inflows** (10\% of total score) – measures net inflows/outflows relative to assets under management. + • **Options Flow (Unusual Activity)** (10\%) – compares call/put volume and adjusts for open interest. + • **Smart Money Index (SMI)** (5\%) – gauges institutional trading by standardizing the SMI relative to its 20-day mean. + • **Analyst Estimate Revisions** (5\%) – percentage of analysts raising vs. lowering estimates in the last month. + +3. **Technical Setup (20\%)** + • **RSI Score** – the Relative Strength Index divided by 100. + • **MACD Score** – 1 if the MACD line is above its signal line, otherwise 0. + • **Trend Score** – assigns 0.5 if the price is above the 50-day moving average and 0.5 if above the 200-day average. + These three are averaged to obtain the Technical Setup score. + +4. **Earnings Surprise (10\%)** + • **Revenue Growth Score** – year-over-year revenue growth normalized against a sector target. + • **EPS Surprise Score** – 1 if actual EPS exceeds analysts’ estimates (beat) or 0 if it misses. + Their average yields the Earnings Surprise score. + +## Final Quant Score Formula + +After calculating each sub-score, the final Quant Score is a weighted sum: + +``` +Quant Score = 0.4*FinancialHealth + + 0.1*FundFlows + + 0.1*OptionsFlow + + 0.05*SMI + + 0.05*AnalystRevisions + + 0.2*TechnicalSetup + + 0.1*EarningsSurprise +``` + +The weights ensure that the Market Sentiment sub-metrics collectively contribute 30\% (10\% + 10\% + 5\% + 5\%) of the final score. + +## Example Excel Implementation + +### Cell Layout (example) + +| Cell | Description | Formula/Value | +|-----|-------------|---------------| +| **B2** | P/E Ratio | Enter raw P/E (e.g., `35.2`) | +| **C2** | P/E Score | `=MIN(1, (Industry_PE/B2))` | +| **B3** | Debt-to-Equity | Enter raw D/E (e.g., `0.48`) | +| **C3** | D/E Score | `=MIN(1, (Max_DE/B3))` | +| **B4** | FCF Yield | Enter FCF yield (e.g., `0.55%`) | +| **C4** | FCF Score | `=MIN(1, B4/Target_FCF_Yield)` | +| **C5** | Financial Health | `=AVERAGE(C2:C4)` | +| **D2** | Fund Flows Score | `=MIN(1, FundFlowRatio/Max_FundFlowRatio)` | +| **D3** | Options Flow Score | `=MIN(1, CallPutRatio/Target_CallPut)` | +| **D4** | SMI Score | `=MIN(1, (SMI_Today - SMI_Mean)/SMI_StdDev)` | +| **D5** | Analyst Revisions Score | `=IF(AnalystRaisePct > AnalystLowerPct,1,IF(AnalystRaisePct=AnalystLowerPct,0.5,0))` | +| **E2** | RSI Score | `=RSI/100` | +| **E3** | MACD Score | `=IF(MACD > SignalLine, 1, 0)` | +| **E4** | Trend Score | `=IF(CurrentPrice > SMA50,0.5,0) + IF(CurrentPrice > SMA200,0.5,0)` | +| **E5** | Technical Setup | `=AVERAGE(E2:E4)` | +| **F2** | Revenue Growth Score | `=MIN(1, YoYRevenueGrowth/Target_RevenueGrowth)` | +| **F3** | EPS Surprise Score | `=IF(Actual_EPS>Estimate_EPS,1,0)` | +| **F4** | Earnings Surprise | `=AVERAGE(F2:F3)` | +| **G6** | **Final Quant Score** | `=0.4*C5+0.1*D2+0.1*D3+0.05*D4+0.05*D5+0.2*E5+0.1*F4` | + +### Notes + +1. Replace `Industry_PE`, `Max_DE`, `Target_FCF_Yield`, `Max_FundFlowRatio`, `Target_CallPut`, `SMI_Mean`, `SMI_StdDev`, `Target_RevenueGrowth`, `AnalystRaisePct`, `AnalystLowerPct`, `RSI`, `MACD`, `SignalLine`, `CurrentPrice`, `SMA50`, `SMA200`, `YoYRevenueGrowth`, `Actual_EPS`, and `Estimate_EPS` with actual input values or cell references. +2. The formulas above return a value between 0 and 1 for each sub-metric; these are combined in the final formula to produce the Quant Score. +3. This file serves as a template; adjust the input targets and thresholds based on sector norms and your own risk tolerance. +