How It Works
Find the Connections
HiddenLevers uses big data to measure millions of relationships between the economy and investments. Interest rates affect home sales and oil prices, which impact the price of Home Depot stock. We uncover these links for 35,000+ investments.
The model starts by measuring the statistical relationship between economic levers and investments - several million regressions are performed as part of this process. This enables the measurement of more obvious relationships like the impact oil prices on Exxon Mobil, and the discovery of less obvious relationships like the impact of auto sales on television broadcasters.
The model starts by measuring the statistical relationship between economic levers and investments - several million regressions are performed as part of this process. This enables the measurement of more obvious relationships like the impact oil prices on Exxon Mobil, and the discovery of less obvious relationships like the impact of auto sales on television broadcasters.
Ask the Big What-ifs
HiddenLevers' research team creates scenarios to model recessions, crises, and other economic events, using historical research and analysis on how economic indicators are correlated.
The HiddenLevers Scenario Library contains almost 90 different built-in scenario outcomes covering events across a range of categories like Domestic (US), Monetary, Global, Historical, and more. These built-in scenarios are just a starting point - scenarios can be customized or created from scratch in HiddenLevers to analyze virtually any macro event.
The HiddenLevers Scenario Library contains almost 90 different built-in scenario outcomes covering events across a range of categories like Domestic (US), Monetary, Global, Historical, and more. These built-in scenarios are just a starting point - scenarios can be customized or created from scratch in HiddenLevers to analyze virtually any macro event.
Model the Impacts
In a stress test using a specific scenario, investment performance is projected by applying the scenario's assumptions on lever movements to the model created for each investment through regression analysis. If a scenario forecasts oil to rise, and Exxon is correlated with oil, then Exxon will rise in that scenario.
The HiddenLevers scenario model accounts for how multiple factors can simultaneously impact an investment, so that rising stock prices and rising oil prices don't get double-counted.
The HiddenLevers scenario model accounts for how multiple factors can simultaneously impact an investment, so that rising stock prices and rising oil prices don't get double-counted.
Independent Whitepapers
The Fed provides an overview of how it uses scenario-based stress testing to examine bank balance sheets and cash flows under a range of economic assumptions.
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MSCI reviews the role of stress testing in the investment process, and includes a discussion on how to include stress testing in investment selection, hedging, and portfolio optimization.
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JP Morgan Investment Analytics & Consulting provide a comparison of VaR and stress testing, and conclude that stress testing provides a deeper understanding of a portfolio's sensitivities and risks.
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