Z-Score Metrics

An in-depth guide to understanding and improving Z-Score metrics

Updated over a week ago

For a basic introduction to the Z-Score, check out our beginners article here ‘Z-Score’. This article will go over the individual metrics along with the levels in which the Z-Score can be improved! 🚀

In this article:

Categories and Metrics

Z-Score stands as a robust metric, offering a comprehensive evaluation of your service quality. Ranging from 0 to 100, the Z-Score is derived from key metrics over the last 180 days, providing a nuanced and insightful overview.

Below we will look into each of the four main metrics, and see how they are broken down into their sub-categories.

1. Profits (Maximum Points: 27)

Return: Measures accumulated profitability with five distinct levels.

Level

Profitability

Points

1

4%

5.25

2

15%

9

3

30%

12.75

4

55%

14.25

5

100%

15

Explanation: As profitability increases from Level 1 to Level 5, the points awarded decrease. This reflects the expectation for strategies to maintain high returns consistently for higher-level achievements. Lower levels reward consistent performance, while higher levels demand sustained excellence.

Benchmark: Evaluates performance against the Top 10 by Market Cap, assigning points based on percentage variation.

Level

Benchmark

Points

1

Top 10 + 5%

1.75

2

Top 10 + 10%

3

3

Top 10 + 20%

4.25

4

Top 10 + 50%

4.75

5

Top 10 + 100%

5

Example: Suppose the Benchmark stands at 10%. This signifies that the Top 10 coins (excluding Stables) experienced a 10% movement. Simultaneously, the PS service, under Z-Score analysis, exhibited a 12% movement during the same period, placing it in level 3. In this context, level 3 signifies surpassing the Benchmark by an additional 20% of that movement, earning it 4.25 points from the Z-Score.

Explanation: Similar to Profit, achieving higher levels requires surpassing a benchmark by a greater margin. Lower levels recognize performance slightly above the benchmark, while higher levels demand more significant outperformance, hence the decrease in points. The decreasing rate of points signifies that surpassing benchmarks by larger percentages requires a more substantial effort, distinguishing top-performing strategies.

Profit Days: Examines service stability through the number of profitable days.

Level

Days Green

Points

1

20

1.6

2

50

2.8

3

90

3.6

4

140

4

Explanation: The number of profitable days directly impacts points. Higher levels demand more frequent profitability, reflecting a commitment to consistent success in daily trading operations. The diminishing rate of increase reflects the growing difficulty of achieving a higher frequency of profitable days.

Sortino Ratio: Weighs profitability against upward volatility using a recognized trading metric.

Level

Sortino

Points

1

> 1

1.5

2

> 3

2.4

3

> 5

3

Explanation: Achieving higher levels in the Sortino Ratio requires a strategy to exhibit better risk-adjusted returns. Lower levels recognize a basic threshold, while higher levels demand superior risk management and performance. The diminishing rate of increase signifies that achieving higher levels demands more significant improvements in risk management and downside protection.

2. Risk (Maximum Points: 30)

Spot Only: A single-level metric granting points if the service exclusively trades in Spot.

Metric

Criteria

Points

Spot Only

Yes

2

Drawdown: Measures regression from the highest to lowest point within a period, providing insight into risk exposure.

Level

DD

Points

1

< 50%

5.25

2

< 40%

9

3

< 25%

12.75

4

< 15%

14.25

5

< 5%

15

Explanation: The Drawdown metric emphasizes risk management. Lower levels reward strategies with higher drawdown tolerance, while higher levels demand stricter risk control, reflected in lower drawdown percentages. The decreasing rate of points reflects the increasing challenge of minimizing drawdowns to a greater extent.

Paid Claims: Assesses the maximum delay in releasing user funds.

Level

Release Time

Points

1

< 7 days

2.5

2

< 3 days

4

3

Daily

5

Explanation: Faster release of user funds leads to higher points. Achieving higher levels requires more efficient fund handling, reducing the time taken to process claims. The diminishing rate of increase emphasizes the importance of efficient fund handling, with the expectation that further reductions in release time become more challenging.

Sharpe Ratio: A popular metric in trading, considering both upward and downward volatility.

Level

Sharpe

Points

1

> 1

2.8

2

> 1.5

4.8

3

> 2

6.8

4

> 3

7.6

5

> 5

8

Explanation: Similar to the Sortino Ratio, achieving higher levels in the Sharpe Ratio demands superior risk-adjusted returns. Lower levels recognize a baseline, while higher levels require a more favorable risk-return profile. The diminishing rate of increase indicates that achieving higher levels demands a more pronounced improvement in risk-return balance.

3. Service Management (Maximum Points: 25)

Sbt Growth: Measures the growth in the strategy's AUM, vital for understanding scalability.

Level

Growth

Points

1

> 20%

1.4

2

> 40%

2

Explanation: Attracting higher AUM growth leads to more points. Higher levels emphasize sustained scalability and growth, demanding more significant increases in AUM to achieve top points. The decreasing rate of increase encourages strategies to attract substantial capital, recognizing that sustaining higher growth rates becomes more challenging.

Investors Growth: Evaluates the growth in the number of investors.

Level

Growth

Points

1

> 10%

1.4

2

> 30%

2

Explanation: Higher levels demand a faster growth rate in the number of investors, reflecting a consistent ability to attract new participants to the service. The diminishing rate of increase signifies that attracting a larger investor base at a faster pace becomes increasingly challenging.

Sbt Min: Measures the AUM that the strategy manages, emphasizing scalability.

Level

AUM

Points

1

> 5,000

6.3

2

> 50,000

10.8

3

> 100,000

15.3

4

> 400,000

17.1

5

> 1,000,000

18

Explanation: Managing higher AUM leads to more points. Higher levels reward strategies that can handle and attract larger amounts of capital, reflecting scalability and trust from investors. The decreasing rate of increase encourages scalability, recognizing that handling and attracting more substantial amounts of capital become progressively more demanding.

Age: Measures the age, in days, of the strategy.

Level

Age

Points

1

> 180

1.5

2

> 365

2.4

3

> 730

3

Explanation: Achieving higher levels requires a longer track record. Lower levels recognize a basic timeframe, while higher levels demand a more extended period, demonstrating stability and reliability over time. The diminishing rate of increase encourages strategies to demonstrate stability and reliability over an extended period.

4. Balance (Maximum Points: 18)

Balanced Score: Grants a bonus of 9 points when the strategy achieves the minimum score in key metrics of "Profit," "Drawdown," "Sbt Min," and "Age."

Metric

Criteria

Points

Balanced

Minimum Score in Key Metrics

9

Explanation: Achieving the minimum score in key metrics leads to the Balanced bonus. The bonus decreases at higher levels, reflecting the expectation for strategies to maintain a well-rounded performance consistently. The decreasing rate of increase emphasizes the importance of maintaining a well-rounded performance consistently, recognizing that sustaining excellence becomes progressively more challenging.

Risk/Reward Ratio: Measures the amount of profit generated vs. drawdown, assessing the strategy's risk profile.

Level

RR

Points

1

> 1

3.15

2

> 1.5

5.4

3

> 2

7.65

4

> 3

8.55

5

> 5

9

Explanation: Higher Risk/Reward Ratios lead to more points. Achieving higher levels demands a more favorable balance between profitability and risk, emphasizing superior risk-adjusted returns. The diminishing rate of increase signifies that achieving a more favorable balance between profitability and risk requires a more substantial improvement in risk-adjusted returns.

Tips to improving the Z-Score

Balanced Metrics: Maintain at least Level 1 in these key metrics - ‘Profit’, ‘Drawdown’, ‘Sbt Min’, and ‘Age’ - for a well-balanced Z-Score and a 9-point Balanced bonus.

Spot Services: If your strategy works well in both Spot and Futures, opt to create a Spot service, as you will receive a boost in points.

Drawdown: Minimize drawdowns by aiming for under 25% (Level 3) or under 15% (Level 4) for a balanced risk approach.

Timely Withdrawals: Optimize Z-Score with timely withdrawals, and opt for a 10% Standby Fund for quick processing of withdrawal requests.

AUM: Elevate Z-Score by attracting investors and starting with a $5,000 AUM goal for Level 1 and a boost in the ‘Balanced’ metric.

FAQ’s

Do WLs also have Z-Score?

Yes, it's optional. WLs can enable or disable it based on their preference.

What Time Frame is used for data measurement?

The last 180 days of service stats are considered for metric calculation.

Can this Time Frame change?

Yes, future updates may extend the Time Frame. Currently, there's no intention to do so.

If a service is less than 180 days old, what happens?

Stats are taken based on available days, offering equal conditions once reaching 180 days.

Can the metric weights change?

Yes, this is the first version, and weights may be adjusted as more data is collected.

Is it possible to have 100 points?

Technically possible, but unlikely and not sustainable long-term. A perfect score demands excellence across all metrics.

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