The Importance of Alpha Factors in Trading

An alpha factor should be predicting the sign of the future returns and a risk factor you know at best hopes to predict the variance of the future return. Market cap can be used both as an alpha factor and as a risk factor because it's kind of a fundamental thing that moves along in the market. If your trading strategy has dependence or correlation with this well-known market cap return stream then that're dependent on some of the risk factor into your returns. We'll do our best to make sure that there's actually concrete examples that you can follow along with if you want to pause this podcast and actually like try implementing this in code  to see what happens.