Ranking Strategies

Updated 12/20/04

Ranking is an important investment tool. This discussion is about WHY to rank.  Click here to learn HOW to rank

Ranking Strategies

Most ranking strategies rank return. However, FastTrack can rank by volatility (Standard Deviation), NCAlpha, Ulcer Performance Index (UPI), correlation, yield, and a variety of other fields. For the most part, ranking strategies by values other than return are pretty simple and are not discussed further in this section.

Ranking by return has many nuances

There are several general categories of return ranking.

1. Rank return for fixed periods of time . . . 5 years, 6 months, 30 days.
   This strategy works for short periods. For longer periods you are welcome to test  it if you wish . . . or save your effort and go to the library to get Money Magazine's year end issue from last year and see how well the top ranked issues did this year. Also, see our discussion of Morningstar rankings. There is a modeling discussion using Morningstar Indices.
2. Rank return based on market patterns. When the market makes an abrupt turn, issues that move more than the broad market will likely continue to beat the market for the duration of the move. Ranking periods from a few months to single day when a sharp turn breaks a downtrend can produce a list of subsequent winners if the market continues upward from that point.
3. Rank return during a correction to find "value" issues.
   When the market sharply declines, but the decline is not as broad as a bear market, then ranking common stocks and sector funds during the decline can produce a list of issues that investors like so much that they refuse to sell.