How Equity Rank Valuations Work
Three independent signals. One combined fair value. 89.1% directional accuracy in simulation.
The Three-Layer Formula
Layer 1 — Fundamental Fair Value
A weighted consensus across 8–15 valuation methods (DCF, P/E, P/B, P/S, EV/EBITDA, Graham Number, DDM, PEG). Each method is weighted by how well it has historically performed in the stock's sector. This gives us the baseline intrinsic value before any market sentiment overlay.
Layer 2 — SAVE Sentiment Overlay
Sentiment, Analyst Consensus, Valuation, Earnings Quality — four independent signals measuring real-time market perception. The composite score (−1 to +1) is multiplied by a sector-calibrated weight (0.10–0.25) before being applied to the fundamental fair value. Fama-MacBeth regression: 82.7% directional accuracy in simulation.
Layer 3 — Innovation Score Overlay
R&D spending, patent velocity, and CapEx discipline vs sector peers. Score 50 = exactly sector average (no adjustment). Higher scores lift fair value for leaders; lower scores apply a discount for laggards. Sector-calibrated alpha range: 0.05 (Utilities) to 0.25 (Biotechnology). Empirical directional accuracy: 64.8% in simulation.
Combined Formula
The two signals have near-zero correlation (r = −0.005), meaning they measure genuinely different things. Combining them adds real information rather than doubling down on the same bet.
Proof: Backtested Accuracy
Combined signal vs individual signal performance from the N=10,000 synthetic simulation.
Why Combine Three Signals?
Redundancy
If one signal is unavailable, the other still works. No black box — each layer has a defined, transparent formula.
Independence
SAVE measures market perception; Innovation measures operational quality. They capture different things, so combining them adds real information.
Calibrated by Sector
Energy stocks get a lower SAVE weight (0.10) because sentiment is less predictive there. Biotech gets a higher Innovation alpha (0.25) because R&D is core.
What Goes Into Each Layer
| Signal | Key Inputs | Source | Update Frequency |
|---|---|---|---|
| SAVE | News tone, search velocity, analyst shifts, earnings call language | AlphaVantage + Google Trends | Live (7-day window) |
| Innovation | R&D/Revenue ratio, patent velocity, CapEx vs peers | SEC filings + AlphaVantage | Weekly batch |
| Fundamental | EPS, book value, FCF, revenue, dividends, growth | AlphaVantage (Supabase cached) | Daily |
See combined valuations for any stock
All three layers applied instantly. Fair value + SAVE overlay + Innovation adjustment.
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