Factors are combined with a proprietary weighting system into a score which is ranked across the Russell 3000. This ranking is turned into a “raw” rating by dividing the universe into 7 equal parts, or “septiles” and assigning into “rating buckets” as follows:
This rating indicates a stock’s likely performance relative to the Russell 3000 over an intermediate time frame (1-6 months). Independent backtesting has confirmed the correlation between the Power Gauge Rating and relative performance at 1, 3, and 6 month intervals, in real-world performance as well as during test periods with known data.
Distribution of Ratings
Raw Power Gauge Ratings for Russell 3000 stocks have a consistent distribution at any given time.
The process is run separately on the broader 5,000 stock universe to determine Power Gauge Ratings for approximately 2,000 small cap stocks not in the Russell 3000. This is done so the very small cap stocks do not distort the rankings of the Russell 3000 stocks.