Ranking-Based

Also seen as: rank weighting, decile weighting

How does Ranking-Based assign weights?

Ranking-Based ranks every candidate by the selected metric, highest value first, and then pays each rank tier the weight you typed for it. The tiers are deciles: Tier 1 is the top 10% of the ranked list and Tier 10 the bottom 10%. Weights are relative, not percentages — the app says "Weights are relative — enter any positive integers", and the ten tier weights are normalised to 100% before capital is assigned, so 50/30/20 and 5/3/2 describe the same allocation. A tier left at 0 receives nothing, which is how the weakest ranks are dropped from the strategy entirely.

The sort direction is always highest-value-first, whatever the metric measures. That is worth reading twice for the risk metrics: rank on Volatility and Tier 1 holds the most volatile instruments, not the calmest.

Which ranking metrics can you choose?

Five ranking metrics are available inside a single strategy. A Combined offers the same list without P/E Ratio.

Average Momentum ranks on average momentum — the average of an instrument's percent price change over 1 month, 3 months, 6 months and 12 months. It is the one ranking metric that blends several spans instead of reading a single window, which is why it ignores the calculation window entirely. Two consequences show up in a ranking: an instrument is not ranked on average momentum until it has 12 months of price history behind it, because until then the longest of the four spans reaches past the start of its history; and because three of the four spans are long, an instrument's rank moves more slowly than its price does.

What does the shape of the rank weights change?

The shape of the ten tier weights controls how concentrated the strategy is, independently of the metric. A steep drop from Tier 1 to Tier 10 pushes most of the capital into the best-ranked names and leaves the strategy effectively holding a handful of positions; a flat set of weights makes Ranking-Based behave like equal weighting, since rank no longer changes the payout. Tiers left at 0 drop out entirely, so a curve that zeroes the bottom half is acting as a filter as well as a weighting. This describes what each shape does — Fincanva does not recommend a shape or a metric.

Defaults in Fincanva

• The default ranking metric is Price Change.
• A fresh Ranking-Based setup starts with all ten tier weights at 0 — no ranking tilt yet. You apply one of the built-in presets or type your own numbers.
• The presets shipped today are Equal Weight, Balanced Top Tilt, Strong Top Tilt, Top 3 Equal, Top Decile Only and Linear Decay, plus the advanced Soft Exclusion, Top Half Tilt, Contrarian / Inverse Rank and Barbell.
• Each tier weight is a whole number from 0 to 100, and the ten weights are normalised to 100% before capital is assigned.
• Ranking-Based works at both levels: inside a single strategy it ranks instruments, and inside a Combined it ranks the member strategies — see Combined weighting.
• Price Change, Volatility and Sharpe Ratio read the calculation window; Average Momentum and P/E Ratio do not, so changing the window leaves those two rankings unchanged.

Worked example

A strategy holds ten instruments and ranks them by Price Change over a 12-month calculation window. With ten instruments and ten tiers there is exactly one instrument per tier. You type 50 in Tier 1, 30 in Tier 2, 20 in Tier 3 and leave Tiers 4 to 10 at 0. The raw total is 100, so the best-ranked instrument takes 50% of capital, the second 30%, the third 20%, and the remaining seven are not held at all. At the next rebalance the ranking is recomputed: if the previous leader slips to third, its weight falls from 50% to 20%, and whichever instrument now ranks first takes the 50%. Nothing about the instruments changed the weights — only their positions in the sorted list did.

Ranking metrics describe historical, simulated behaviour, not future results. Fincanva provides no financial advice — see Is this financial advice?.