The Universe section of the Strategy Edit page helps you define the universe of stocks your strategy assesses. You can choose the market, exchanges, currency and benchmark. You can also rank the market according to your preferred metrics:
Ranking the Universe
Ranking the universe of stocks is one of the most important aspects of the back-testing engine. Ranking allows an investor to prioritise certain stocks which will then be selected by the ‘buy’ criteria below.
For example, if you rank the Universe by market cap in descending order, your strategy starts at the top (i.e. the largest companies) and works its way down looking for companies to buy according to your buy condition. This feature allows you to prioritise the type of company your strategy selects.
1) To rank the universe, click on the Rank Universe (1) pencil icon.
2) The ‘Universe’ dialogue box appears:
3) Click on the N.A. button:
4) The ‘Single Select’ dialogue box appears:
5) Select the + button and choose the financial metric you want, in this case ‘Yearly Price Change’:
6) Note the ‘Descending’ radio button selected below; the engine will start with the companies with the highest yearly price change over the previous year and work down to the poorest performing company looking for companies to buy which fit your ‘buy’ condition:
7) To rank another variable, choose Rank Universe (2) and repeat the process as above:
8) Note that Market Value ‘Descending’ is a second metric. To combine the two ranked values select ‘Combine Rankings’. This feature ranks the Universe based on the combined ranked value of the two metrics you have selected. Below, you can see the two ranked metrics are Yearly Price Change and Market Value in descending order. The engine will place the largest companies with the greatest Yearly Price Change at the top and rank the Universe of stocks based on those two combined values in descending order. It will work down this list looking for companies to buy based on the buy conditions you have entered in the buy criteria.
9) The ‘Universe’ dialogue box appears. Select the orange button and choose YES:
10) In the example below the user has ranked their universe so their strategy prioritises large companies with strong price momentum over the preceeding year: