Glossary

Quant terms used on FinLab AI

Understand the numbers before they impress you. Fourteen terms, plain language.

Terms are ordered to mirror the FinLab AI backtest report — 1–2 sentences each, no jargon stacking.

CAGR (Compound Annual Growth Rate)

Total strategy return expressed as a single compounded annual rate. A 5-year cumulative return of 100% works out to a CAGR of about 14.9%.

Sharpe Ratio

Excess return per unit of risk (volatility). > 1 is solid, > 2 is excellent; the absolute number depends on the risk-free rate assumption used in the calculation.

Max Drawdown

The largest peak-to-trough decline in equity over the period. -30% means at the worst point your capital was down by a third — the key metric for whether you can sleep at night.

Backtest

Simulating a strategy on historical data. A great backtest doesn't promise future returns, but a bad backtest almost always means a worse future.

Win Rate

The share of trades that ended profitably. High win rate doesn't equal high returns — a strategy that loses big and wins small can have a great win rate and still lose money.

Turnover

How frequently the portfolio is rotated. 200% annual turnover means the whole portfolio is swapped roughly twice a year; high turnover eats into returns through fees and slippage.

Slippage

The gap between your intended price and the price you actually fill at. FinLab backtests include a reasonable slippage assumption so you don't overestimate strategy performance.

Alpha

Return earned above what the broader market explains. Alpha = 5% means the strategy beat the market-driven return by 5 percentage points.

Beta

How tightly a strategy moves with the market. Beta = 1 tracks the market, < 1 is more defensive, > 1 is more aggressive.

F-Score (Piotroski F-Score)

A 0–9 score across nine financial-health checks. Higher scores indicate cleaner, more conservative financials — a common quality filter for value strategies.

Momentum

The empirical tendency for recent winners to keep winning. Momentum strategies typically buy stocks that have outperformed over 3–12 months, rebalanced monthly or quarterly.

Mean Reversion

The empirical tendency for stretched moves to retrace. Mean-reversion strategies fade recent oversold names and tend to complement momentum strategies.

Quant Trading

Generating trades from statistical models and code rather than discretionary judgment. FinLab AI focuses on transparent, reproducible quant research.

Factor / Indicator

A quantifiable signal used to select stocks — e.g. P/E, YoY revenue growth, RSI. FinLab AI ships 900+ Taiwan and US factors you can combine.