Rebalancing Live Strategies and the X-Ray Tool

Once you have created a live strategy on Portfolio123 you will need to rebalance the portfolio at the interval of your choice to determine which stocks to sell and which to buy. When you created the live strategy you set the rebalance mode to either Manual, Recommend or Automatic. Regardless of what setting you used, you can always do a manual rebalance at any time. This article will discuss the manual rebalance process and give you some tips on how to setup your strategy to utilize the features available on the rebalance page.

Transactions

To start the manual rebalance process you go to the Rebalance tab in the live strategy and click Get Recommendations which will display the recommended transactions (you may need to choose other settings depending on the rebalance method). In the image below the recommendations are to sell three positions and buy 4 new ones.

You have the option to reject transactions and then click the Get Recommendations button to see alternative recommendations. Once you are satisfied with the recommendations you can click the Commit button or click the Trade button to submit the orders to your broker (if you have linked your brokerage account).

If you used the Commit button to create the transactions, you might want to go to the Transactions page in the strategy and edit the prices for each transaction so they match what you actually paid for them when you placed the trades. This is not required and only needed if you want your performance history to be as accurate as possible.

Discretionary mode

To have complete control of transactions click Switch to Discretionary. The Transactions page in Discretionary Rebalance allows you to delete transactions and also edit all the data fields for the number of shares, price, value, etc. However, you will no longer be able to refresh recommendations. The Commit and Trade buttons work the same way as in Non-Discretionary mode.

Rebalance X-Ray

The Rebalance X-Ray is where things get really interesting. It's composed of a series of reports where you can research how the strategy is evaluating the stocks in your universe. The X-Ray is made up of a Settings section and several reports like: General, Buy Rules, Sell Rules, Ranks (Top Level) and Ranks (Factors).

X-Ray: Settings

The first thing to mention is the various filters & styles. Experiment with the settings to customize your page so that it works best for your workflow. The style options let you set the color for the text in the Ticker column, set which Tickers are in bold and which use the strikethrough font. There is also a setting for which rows to shade light blue.

There are three set of columns in the reports: Fixed, Extra, and Report. The Fixed ones do not scroll horizontally and are always visible. The Extra ones are chosen using the Extra Column drop-down and include: Is a Buy, Is a Sell, Sector, Sub Sector, Industry, Sub-Industry, Market Cap. The Report ones are report specific columns.

The Show filter determines which stocks will be displayed in the list. When I rebalance I usually don't take the initial buy and sell recommendations. I like to see the recommended buys and sells, my current holdings and also see other stocks that have passed my buy rules. So I set the Show filter to include Current Holdings, Projected Holdings and Is a Buy. Then I sort the page by Rank and get the complete picture as to where my current holdings fall in relation to other stocks that passed my buy rules.

X-Ray: Buy / Sell Reports

These pages include a column for each Buy or Sell rule and whether the rule evaluated to True or False. An example of the Buy Rules report is shown below. Notice that an additional value is displayed below the True/False condition. To configure what you display see the section below Displaying Factor Values.

X-Ray: Rank Reports

Ultimate level subscribers have access to rank reports which show you the rank details. If you click on the overall Rank you will see the details for the Top Level ranks ( See A below). These are the Composite Nodes or Factor nodes that are on the top level of a ranking system.

Clicking on a Factor Rank will bring up a histogram for that factor showing you where the value falls within the histogram in red, outlier buckets, and the Rank line (see B below).

X-Ray: Displaying Factor Values

You can optionally show any value computed in your Buy or Sell rules by prefixing the formula with a special syntax. For example a Buy rule like Pr2SalesTTM < 10 evaluates to True or False. To also include the value of Price to Sales in the Buy report add the special @: syntax like this @:Pr2SalesTTM < 10. Please note that you will need to exit the Rebalance mode, click on Trading System, then edit the rule to add the @:

Hint 1: You can use the @: syntax to display data that is not actually part of your buy and sell rules, but is useful to know while rebalancing. For example to see the Price Target in the Buy report add a rule like @:PriceTarget or True . The "or True" is needed so the buy rule always passes and doesn't affect your rebalance results. For sell rules use "or False".

Hint 2: You can use the Portfolio function to show if the stock is already held in one of your other live strategies.

Caveats: If your rules contain functions like SecWeight and MaxCorrel these will always return N/A in the report because they cannot be evaluated outside the context of a rebalance done in a specific sequence. In addition, the data item in the report can only return numeric values - not dates or text.

Allocation

The Allocation page shows you the projected portfolio by Market Cap, Sector, and Sub-Sector weights.