Rather than relying on any single indicator, QuanterLab combines multiple metrics into a composite score ranging from 0 to 100. This multi-factor approach aims to identify the highest-quality mean reversion candidates.
Daily Timeframe Weights
For daily bar analysis, the composite score uses these weights:
- Hurst Exponent: 25% - Core regime detection
- RSI Win Rate: 25% - Entry signal quality
- Variance Ratio: 15% - Mean reversion confirmation
- Half-Life: 15% - Reversion speed
- Bollinger Band Win Rate: 15% - Secondary entry signal
- Autocorrelation: 5% - Additional confirmation
Hourly Timeframe Weights
Shorter timeframes emphasize different factors:
- Hurst Exponent: 30% - Even more critical for short-term
- Variance Ratio: 20% - Increased importance
- Half-Life: 20% - Speed matters more intraday
- RSI Win Rate: 15% - Reduced vs daily
- Bollinger Band Win Rate: 10% - Reduced vs daily
- Autocorrelation: 5% - Same as daily
Score Calculation
Each component is first normalized to a 0-100 scale, then weighted:
Minimum Thresholds
Securities must meet minimum composite scores to appear in scanner results:
- Daily timeframe: Minimum score of 45
- Hourly timeframe: Minimum score of 35
These thresholds filter out securities that don't show sufficient mean-reverting characteristics.
Higher scores indicate stronger mean reversion characteristics and better historical performance of entry signals. A score of 80+ represents the top tier of mean reversion candidates.
Why Multi-Factor?
Single-indicator approaches have weaknesses:
- Hurst alone doesn't tell you when to enter
- RSI alone doesn't tell you if mean reversion is likely
- Win rates alone can be misleading without regime context
By combining metrics, the composite score provides a more robust assessment than any individual component.