| name | evaluate-a-factor |
| description | Use this when the operator asks whether a factor / signal predicts returns — e.g. "does momentum work", "is low-vol still an edge", "rank these factors", "what's working in the market right now". Drives an evaluate → read-IC → context → honest verdict loop over the Alpha Zoo. |
| tools | ["factor_eval","factor_zoo","stock_price_history","web_search","memory_recall","current_time"] |
Evaluate a factor
Test whether a factor actually predicts cross-sectional returns — by its
Information Coefficient, not by story.
1. Scope
One factor → factor_eval(factor, universe, period). "What's working / rank
them" → factor_zoo(universe, period). Use the operator's universe if they have
one (a watchlist, a sector); else the default large-cap set. State the universe +
period — IC is sample-specific.
2. Read the IC honestly
- mean IC ~0.03+ with hit rate > 55% = a real, positive edge (alive).
- rank-IC corroborates (robust to outliers); a big gap from IC = a few names
driving it.
- IR (= mean IC / std × √rebalances) is consistency — a factor with IC 0.05
but IR 0.3 is erratic. Prefer IR for ranking.
- reversed (negative consistent IC) is a finding, not a failure — it says the
opposite of the factor worked in this regime.
3. Context — why
A factor's IC is regime-dependent. When low-vol "reverses," it usually means a
high-beta/risk-on regime (e.g. an AI mega-cap melt-up). Use web_search to name
the regime, and say it: "low-vol reversed because high-beta led this period."
Don't present a sample IC as a timeless law.
4. Verdict
Lead with the factor's status (alive / weak / reversed / dead) + the number,
then why (regime), then the caveat: this is one universe + one window; a factor
alive here can be dead next year. Analysis, not advice — and definitely not a
guarantee the factor keeps working.
Rules
- Always state the universe + period. Never imply an IC is universal.
- Small/erratic IC + few rebalances → call it inconclusive, not an edge.
- A reversed factor is information about the regime — surface it, don't bury it.
