I have a screen that uses the Core: Quality RS.
If I change the Universe from “All USA Listed” to “NO OTC Exchange” the rankings change.
My #1 goes to #6 and my #4 goes to #1.
Every ranking changes.
I would expect the ranking so stay more or less the same unless some new tickers were added or excluded, but my list of tickers is basically the same due to other screener rules.
You can see it here:
https://www.portfolio123.com/app/screen/summary/271554?st=0&mt=1
Changing the universe to NOOTC excludes 835 stocks of the 3234 that pass your MktCap > 1000 rule. That’s a large number. The impact on rank position will be enormous.
But why would that rearrange the same top 5?
Why is #4 suddenly better than #1?
If company X is the best of the best in a universe, and I remove 25% of the companies from that universe, why would company X still not be the best of the best? Nothing has changed for company X relative to the remaining 75% of the companies, right?
Made 2 screener runs and detected what you describe. But the rank differences between 2 assets with changing rank positions are less than .5%. Can this be a technical issue (rounding)? Should be answered by P123.
Matthias
Everything has changed!
First of all, remember that Core: Quality ranks against other companies in the same industry for the majority of its factors. You’re taking out more than 40% of the companies that are being ranked, so the ones that are left are going to get very different ranks. Remember that you’re ranking based on the entire universe BEFORE the MktCap > 1000 and Rating > 80 rules. So you’re reducing the universe from 10,825 stocks to 6,167. That’s going to make an enormous difference! Not only that, but the excluded companies from the Rating rule will be quite different too.
So let’s look at Regeneron as an example. If you rank it on ALL listed stocks, it ranks #6, behind SAFM, BMXI, ANGPY, INCY, and USNA. In your screen, BMXI is excluded because of low market cap and INCY is excluded because of your Rating rule. If you rank it on NOOTC stocks, it ranks #2, behind INCY, and USNA and SAFM rank lower. ANGPY and BMXI are out of the picture since they’re OTC. So why does REGN rank higher than USNA and SAFM with NOOTC and lower with all listed stocks? Because its asset turnover rank has dropped 3%, from 96.53% to 93.23%. The industry it’s in, BIOPHARMAOTHER, has grown from 125 to 172 stocks. So its asset turnover rank is inevitably going to be different. The industries that USNA and SAFM are in are entirely different, so their asset turnover ranks have also changed: USNA’s went down 1% and SAFM’s went up 4%. The changes to the other folders aren’t as extreme, but SAFM’s 5Y ROI rank went from 89% to 96% simply because the number of companies with a 5Y ROI in its industry (AGRICULTURE) went from 27 to 85 once you included all those OTC stocks with low ROIs.
Thanks Yuval. That is an excellent explanation. I also underscores for me the importance of selecting the correct Universe.