Σ1 is shorthand for Σwi = 1. This means that any given instant a portfolio can be expressed as a series of investment weights which always sum to 1. This principle even applies to long-short funds with positive and negative investment weightings and leveraged funds with negative cash weightings. This is the primary meaning of Sigma1.
σ1, with a lower-case sigma, is shorthand for one standard deviation (σ times 1). This is the second thing I associate with Sigma1 Software — a classic measure of financial risk.
While a portfolio manager may have many responsibilities, his or her “job one” is deciding which investments in what proportion. It is surprising how challenging this job can be, given that even a 100-asset portfolio can have many more than trillions of trillions of possible weightings [actually a gross understatement].
Wrapping up; Sigma1 is a startup creating financial software focused on investment portfolio optimization. In this context “investment portfolio” can mean a proprietary-trading fund, a mutual fund, an ETF, a financial endowment, “index plus”, or other managed investment. At the end the day, Sigma1 means business.
