# Non-Reductive Component Exposure

Each factor generates buy/sell signals for every name in the investment universe. We have built these factors such that each exists as a standalone signal capable of delivering an investment portfolio that we would be excited about.

We do not stop with a singular signal however, instead we have constructed these factors with the ultimate goal of expressing all of them inside of our final portfolio.

We are able to do this because the alpha signals in our factors are not correlated! The actual number varies slightly over time but we target cross correlations in the residuals of |0.20| or less. In other words we have managed to build several distinct alpha factors, each with positive return expectation, that are not correlated and we express each of these in our final portfolio.

Our factors hedge each other, they are complimentary to one another. The expression of each of these in our portfolio and the resulting return profile that is realized is designed intentionally to be as ‘non-reductive’ as possible, we want to realize the benefit of each component factor without causing the returns on the others to meaningfully suffer.