How is user performance measured by TipRank?

How is user performance measured by TipRank?

HomeGlossary: How User Performance Is Measured by TipRanks Users may choose between two different kind of performance measurements: portfolio management and stock selection performance. Every day, the "My Performance" page is refreshed with the most recent information on your portfolio.

stock picker display

Like analysts, TipRanks treats each buy or sell decision you make as a "recommendation" in order to evaluate your effectiveness as a stock picker. Our algorithm considers a purchase of a stock to be a one-year recommendation; if you cancel the position before then, it just tracks performance up to that time.

Your hit ratio is measured by the first indicator, "Success Rate." Each transaction you execute, or advice you make, results in either a profit or a loss. By dividing the entire value of your successful transactions by the total number of deals, you can calculate your success rate.

The "Average Returns" show you how well your choices worked out. This shows the typical gain or loss on your transactions.

Performance of Portfolio Managers

In addition to being evaluated as stock pickers, users who have uploaded their selections for stocks to the smart portfolio and allocated money by changing the share count are also evaluated as portfolio managers. Our assessment tracks change and is based on the assumption that your portfolio is always 100% invested.

For instance, let's say you invest $1,000 on day one in a stock that gains 10% over time. Your portfolio is worth $1,100, and you have received a $100 return. You put in an extra $10,000 in a different stock on day two. If it loses 5%, your second investment will lose $500.

On day two, the value of your portfolio was $11,100. This covers both your new investment from day two and your end-of-day value from day one. By the conclusion of the second day, your portfolio is now worth just $10,600. This is the sum of your first day's end value and your second day's end value.

Your portfolio's overall return, as reported by TipRanks, is 5.05%. Day 1: 10%, Day 2: -4.55% (1.1*0.955=1.0505=5.05%).

Next, the return is split by the daily percentage change in the portfolio's standard deviation (adjusted for the time period). We divide your returns by the standard deviation to get your portfolio's Sharpe ratio. This demonstrates the level of risk assumed to generate profits.

To be clear, two users would not score equally if they both had 50% returns and one of them had taken high-risk stocks and the other low-risk. This is because the trader who earned the same return with less risk is really a better trader, as seen by his higher Sharpe ratio.

Time is the last element we will consider. In order to prevent newly registered users who have very high returns (mainly from pure chance) from rising to the top rank, Sharpe is adjusted based on the duration elapsed from the portfolio inception. You may move up and down the rankings during the first month's penalty reduction, which ends altogether after a year of trade.

The following three actions are necessary for you to get recognition as a portfolio manager.

Make a portfolio on SmartPortfolio and register for a free TipRanks profile.

Upload share prices for a minimum of five places (you don't have to activate all five at once if you have already uploaded share prices for the first three positions). It is important to note that the algorithm will not rank the portfolio if you only contribute one share; instead, you must distribute in a realistic manner.

Wait two trading days for the algorithm to rate your performance if the portfolio is brand-new.