Configuration Options¶

Comprehensive reference for all configuration parameters in the Systematic Investment Analysis Framework.

Configuration File Structure¶

All configurations use YAML format with these main sections:

name: "configuration_name"
description: "Configuration description"

universe:          # Stock selection criteria
quality:          # Financial strength parameters
value:            # Valuation criteria  
growth:           # Growth requirements
risk:             # Risk assessment parameters
valuation:        # Valuation model settings
max_results: 50   # Output limits
sort_by: "composite_score"  # Ranking criteria

Universe Configuration¶

Basic Parameters¶

universe:
  region: "US"                    # Region selection
  min_market_cap: 1000           # Minimum market cap ($M)
  max_market_cap: 100000         # Maximum market cap ($M)

  # Stock list options
  custom_tickers: ["AAPL", "GOOGL"]        # Specific stocks
  pre_screening_universe: "sp500"          # Predefined lists
  top_n_by_market_cap: 100                # Top N by size

  # Sector filtering
  sectors: ["Technology", "Healthcare"]    # Include sectors
  exclude_sectors: ["Utilities"]          # Exclude sectors

Region Options¶

Region	Description	Coverage
`"US"`	United States	S&P 500, major exchanges
`"EU"`	Europe	Major European stocks
`"JP"`	Japan	Major Japanese stocks
`"ALL"`	Global	All available regions

Predefined Universes¶

Universe	Stocks	Description
`"sp500"`	~503	S&P 500 constituents
`"sp100"`	~100	S&P 100 large caps
`"nasdaq100"`	~100	NASDAQ 100 tech focus

Sector Classifications¶

Available sectors for filtering: - Technology - Healthcare
- Financial Services - Consumer Cyclical - Consumer Defensive - Communication Services - Industrials - Energy - Basic Materials - Real Estate - Utilities

Quality Configuration¶

Financial Strength Metrics¶

quality:
  min_roic: 0.12                 # Return on Invested Capital
  min_roe: 0.15                  # Return on Equity
  min_current_ratio: 1.2         # Current assets / Current liabilities
  max_debt_equity: 0.6           # Total debt / Total equity
  min_interest_coverage: 5.0     # EBIT / Interest expense

Parameter Ranges¶

Parameter	Typical Range	Conservative	Aggressive
`min_roic`	0.08 - 0.20	0.15+	0.08+
`min_roe`	0.10 - 0.25	0.18+	0.10+
`min_current_ratio`	1.0 - 2.0	1.5+	1.0+
`max_debt_equity`	0.3 - 1.0	0.4	0.8
`min_interest_coverage`	2.0 - 10.0	5.0+	2.0+

Sector Adjustments¶

Different sectors have different normal ranges:

Technology Sector¶

quality:
  min_roic: 0.15    # Higher due to asset-light models
  min_roe: 0.18     # Expect higher returns
  max_debt_equity: 0.3  # Typically low debt

Utilities Sector¶

quality:
  min_roic: 0.06    # Lower due to capital intensity
  min_roe: 0.10     # Regulated returns
  max_debt_equity: 1.2  # Infrastructure requires debt

Value Configuration¶

Valuation Metrics¶

value:
  max_pe: 25                     # Price / Earnings
  max_pb: 3.5                    # Price / Book
  max_ev_ebitda: 15              # Enterprise Value / EBITDA
  max_ev_ebit: 20                # Enterprise Value / EBIT
  max_p_fcf: 30                  # Price / Free Cash Flow
  min_dividend_yield: 0.02       # Minimum dividend yield

Sector-Specific Valuations¶

High Growth Sectors (Technology)¶

value:
  max_pe: 35        # Accept higher multiples
  max_pb: 8.0       # Growth premium
  max_ev_ebitda: 25 # SaaS/platform businesses

Stable Sectors (Utilities/Consumer Staples)¶

value:
  max_pe: 20        # Lower multiples expected
  max_pb: 2.5       # Asset-based valuation
  max_ev_ebitda: 12 # Stable cash flows

Cyclical Sectors (Energy/Materials)¶

value:
  max_pe: 15        # Use normalized earnings
  max_pb: 1.5       # Book value important
  max_ev_ebitda: 8  # Cycle-adjusted multiples

Growth Configuration¶

Growth Metrics¶

growth:
  min_revenue_growth: 0.05       # Revenue growth rate
  min_earnings_growth: 0.08      # Earnings growth rate
  min_fcf_growth: 0.03           # Free cash flow growth
  min_book_value_growth: 0.04    # Book value growth

  # Advanced options
  revenue_consistency: 0.8       # Growth consistency requirement
  earnings_quality: 0.7          # Earnings quality threshold

Growth Expectations by Sector¶

High Growth Sectors¶

growth:
  min_revenue_growth: 0.15   # 15%+ revenue growth
  min_earnings_growth: 0.20  # 20%+ earnings growth
  # Technology, Biotech, High-growth consumer

Stable Growth Sectors¶

growth:
  min_revenue_growth: 0.03   # 3%+ revenue growth
  min_earnings_growth: 0.05  # 5%+ earnings growth
  # Utilities, Consumer staples, REITs

Cyclical Sectors¶

growth:
  min_revenue_growth: -0.05  # Allow cyclical declines
  min_earnings_growth: -0.10 # Volatile earnings acceptable
  # Energy, Materials, Industrials

Risk Configuration¶

Risk Assessment Parameters¶

risk:
  max_beta: 1.5                  # Market risk (volatility)
  min_liquidity_ratio: 1.0       # Liquidity requirements
  max_concentration_risk: 0.3    # Customer/geographic concentration
  cyclical_adjustment: true      # Apply sector adjustments

  # Advanced risk metrics
  max_financial_leverage: 3.0    # Financial risk
  min_altman_z_score: 2.5       # Bankruptcy risk

Risk Tolerance Levels¶

Conservative Risk Profile¶

risk:
  max_beta: 1.0             # Low volatility
  min_liquidity_ratio: 1.5  # Strong liquidity
  max_concentration_risk: 0.2  # Diversified revenue
  cyclical_adjustment: true    # Sector-aware

Moderate Risk Profile¶

risk:
  max_beta: 1.3             # Moderate volatility
  min_liquidity_ratio: 1.2  # Adequate liquidity  
  max_concentration_risk: 0.3  # Some concentration OK
  cyclical_adjustment: true    # Sector-aware

Aggressive Risk Profile¶

risk:
  max_beta: 2.0             # High volatility acceptable
  min_liquidity_ratio: 1.0  # Basic liquidity only
  max_concentration_risk: 0.5  # Higher concentration OK
  cyclical_adjustment: false   # Raw metrics

Valuation Configuration¶

Model Selection¶

valuation:
  models: ["dcf", "rim"]         # Valuation models to run
  scenarios: ["bear", "base", "bull"]  # Scenario analysis

  # DCF Model parameters
  dcf_years: 10                  # Projection years
  terminal_growth_rate: 0.025    # Terminal growth (2.5%)
  risk_free_rate: 0.04          # Override risk-free rate
  market_risk_premium: 0.06     # Equity risk premium

  # RIM Model parameters
  rim_years: 10                  # Projection years
  required_return: 0.10         # Required return rate
  fade_period: 5                # ROE fade to industry average

Scenario Parameters¶

Conservative (Bear) Scenario¶

valuation:
  terminal_growth_rate: 0.02    # 2% terminal growth
  market_risk_premium: 0.08     # Higher risk premium
  growth_rate_adjustment: 0.5   # 50% of projected growth

Base Scenario¶

valuation:
  terminal_growth_rate: 0.025   # 2.5% terminal growth
  market_risk_premium: 0.06     # Standard risk premium
  growth_rate_adjustment: 1.0   # Full projected growth

Optimistic (Bull) Scenario¶

valuation:
  terminal_growth_rate: 0.03    # 3% terminal growth
  market_risk_premium: 0.05     # Lower risk premium
  growth_rate_adjustment: 1.2   # 120% of projected growth

Output Configuration¶

Results Control¶

max_results: 50                  # Maximum stocks in output
sort_by: "composite_score"       # Primary sort criterion
generate_reports: true           # Generate detailed reports
save_data: true                 # Save intermediate calculations

# Additional output options
include_failed_stocks: true      # Include filtered-out stocks
detailed_scoring: true           # Show sub-component scores
sector_analysis: true           # Include sector benchmarking

Sort Options¶

Sort Criterion	Description
`"composite_score"`	Overall weighted score
`"quality_score"`	Financial strength ranking
`"value_score"`	Valuation attractiveness
`"growth_score"`	Growth prospects
`"market_cap"`	Company size
`"risk_score"`	Risk level (ascending)

Advanced Configuration¶

Custom Scoring Weights¶

scoring:
  quality_weight: 0.30          # 30% of composite score
  value_weight: 0.30            # 30% of composite score
  growth_weight: 0.25           # 25% of composite score
  risk_weight: 0.15             # 15% of composite score

Filtering Thresholds¶

filtering:
  min_quality_score: 40         # Minimum quality threshold
  min_value_score: 30           # Minimum value threshold
  min_growth_score: 20          # Minimum growth threshold
  max_risk_score: 80            # Maximum risk threshold
  min_composite_score: 50       # Minimum overall threshold

Data Quality Controls¶

data_quality:
  min_data_completeness: 0.8    # 80% of metrics must be available
  max_data_age_days: 90         # Maximum data staleness
  exclude_delisted: true        # Remove delisted stocks
  exclude_penny_stocks: true    # Remove stocks under $5

Configuration Examples¶

Conservative Value Strategy¶

name: "conservative_value"
description: "High-quality companies at reasonable prices"

universe:
  pre_screening_universe: "sp500"
  min_market_cap: 5000          # Large caps only

quality:
  min_roic: 0.15                # Strong returns
  min_roe: 0.18
  max_debt_equity: 0.4          # Conservative debt

value:
  max_pe: 18                    # Reasonable multiples
  max_pb: 2.5
  max_ev_ebitda: 12

growth:
  min_revenue_growth: 0.03      # Steady growth
  min_earnings_growth: 0.05

risk:
  max_beta: 1.1                 # Lower volatility
  cyclical_adjustment: true

max_results: 25

Aggressive Growth Strategy¶

name: "aggressive_growth"
description: "High-growth companies with expansion potential"

universe:
  sectors: ["Technology", "Healthcare", "Consumer Cyclical"]
  min_market_cap: 1000

quality:
  min_roic: 0.12                # Good returns
  min_roe: 0.15
  max_debt_equity: 0.8          # Allow more leverage

value:
  max_pe: 40                    # Accept growth premiums
  max_pb: 8.0
  max_ev_ebitda: 25

growth:
  min_revenue_growth: 0.15      # Strong growth required
  min_earnings_growth: 0.20

risk:
  max_beta: 1.8                 # Accept volatility
  cyclical_adjustment: false

max_results: 30

Configuration Validation¶

The framework validates all parameters and provides helpful error messages:

# This will generate validation errors:
quality:
  min_roe: 15.0                 # ERROR: Should be 0.15 (decimal)
  max_debt_equity: -0.5         # ERROR: Cannot be negative

value:
  max_pe: 0                     # ERROR: Must be positive

Best Practices¶

Parameter Selection¶

Start with sector benchmarks - Research typical ranges for your target sectors
Consider market conditions - Adjust for bull/bear markets
Backtest configurations - Validate historical performance
Document reasoning - Note why each threshold was chosen

Common Mistakes¶

❌ Using percentage format - Use 0.15 not 15 for 15% ❌ Ignoring sector differences - Tech vs utility expectations
❌ Over-optimization - Fitting criteria to desired results ❌ Static thresholds - Not adjusting for market cycles

Maintenance¶

Review and update quarterly
Adjust for changing market conditions
Monitor results vs. expectations
Consider sector rotation impacts

Next Steps¶

Running Analysis - Execute your configuration
Understanding Results - Interpret the output
Tutorials - Step-by-step examples