Multi Factor Startegy

Ashita Chandane | June 7, 2021

For my Strategy Simulation project, I have taken the following steps:

 Step 1: Choose your universe 

In this step, I was asked to select a universe of stocks. Here, the universe is the set of stocks on which your stock selection criteria would run. Hence, I chose Midcaps which I think can give better returns over a period of time and matched my risk appetite as well.

Step 2: Choose your sectors or industries

In this step, I selected the following industries: Chemicals, Diversified, Energy, FMCG, Healthcare, Technology, and Textile. I believe in having a well-diversified portfolio in order to prevent major losses due to sudden volatility.

Step 3: Choose your frequency 

I believe that investing in forgetting about your investment portfolio for the long term is not an ideal strategy to adopt. We live in a VUCA world and so is the Stock Market. Hence, I chose the Monthly frequency for portfolio rebalancing.

Step 4: Choose your theme

In this step, I was asked to choose from a set of factors or a combination of factors available on the website. I have taken Quality as my portfolio theme. Hence, I chose the following: Market_Cap + Quality, Momentum_ShortTerm + Quality, Volatility_LongTerm + Quality, Dividend_Yield + Quality.


Under advanced feature, I had selected Normalization – Sector Cross-Sectional, which normalises each sector data separately as I have a diversified my portfolio across several industries. Then I also selected Position Sizing – Inverse volatility, which helped me allocate a smaller size for the more volatile position and a larger size for less volatile positions. This feature also helped me to reduce the drawdown and increase annualized returns along with the Sharpe ratio of the portfolio.


My portfolio has outperformed the Nifty index between June 2011 to December 2018. After running this strategy, I got the following results:

·      Annualized Return: 28.02 %

·      Annualized Risk: 10.55 %

·      Max Drawdown: 21.22 %

·      Sharpe Ratio: 2.09 %

Below is the screenshot of the same for your reference.

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