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.

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.

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.
Model Overview See PDF
Scenario Creation Methodology See PDF
Model Performance Review See PDF

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. See PDF
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. See PDF
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. See PDF