In addition, Hidden Levers offers an economic data center that displays all of the data that estimates are based on. This data is organized by type (currencies, economic indicators, etc.) and it can be viewed globally or by region. This portion of the program also contains a list of widgets. These widgets allow you to rapidly perform certain operations-for example, to chart an individual lever against a stock or chart one lever against another. More will be added over time.
How Does The Model Work?
In theory, Hidden Levers sounds great, but in order to be useful, it has to get the correlations between the scenarios, the hidden levers and the investments correct. This is a tall order. The firm uses statistical analysis and other tools to model these interrelationships across 100 economic indications, U.S. stocks, ETFs, mutual funds and 15 major currencies over a ten-year period.
A full explanation of the methodology is beyond the scope of this article, but in summary, Hidden Levers performs a regression analysis of each stock against the S&P 500 and each market indicator. Once the regression analysis is finished, they filter for lever relationships that are significant (according to their analysis) with at least a 95% confidence level. These are the results that drive the stock screener and scenario analysis. The Hidden Levers Web site provides a more detailed explanation of the econometric model.
Is It Accurate?
Since the application is still new, it is too early to draw any conclusions about the accuracy of the tool's predictions, but in principle, I like the idea of applying this sort of analysis to a portfolio. If nothing else, it forces advisors to look at portfolios through a prism they don't normally use. If Hidden Levers can really help advisors rapidly incorporate macro trends and economic indicators into their analysis, they will be doing the industry a major service. I particularly like the ability to stress-test existing portfolios against all scenarios and receive hedge suggestions to protect against major vulnerabilities.
Since this is a beta site, there are numerous minor annoyances. Some of the nomenclature could be improved. The labels are not really indicative to a novice user of what a tool does. At times, the site was a bit slow, but I suspect this will be addressed in due course. Currently, the universe of mutual funds and other assets is not complete, but Hidden Levers is adding data regularly.
Hidden Levers offers all users a 15-day free trial. After that, it costs $200 per month for the full professional version, or $50 per month for a plan that includes a subset of the features discussed above (see site for details).
For a limited time, Hidden Levers is looking for additional beta testers, and it is offering a special deal to readers of Financial Advisor magazine. Beta testers will receive 75% off the list price of the program for the remainder of 2011, and then 50% off for life thereafter. To sign up for this special offer, use the following link:
https://www.hiddenlevers.com/hl/user/signup?discountcode=PROBETA We believe that Hidden Levers, and others developing this type of software for advisors, are going to garner more attention in the months ahead. With the free trial offer and the special beta offer, trying Hidden Levers is now risk free. Check it out.