Signficance of the Name Sigma 1 (Σ1)

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.

 

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