Factor Attribution and Active Return

How portfolio return is decomposed into benchmark return, factor tilt, and security selection.

Category: Portfolio

Active return

Active return is portfolio return minus benchmark return. SurgeFlow treats this as the base attribution identity for factor and sleeve analysis.

Tilt and selection

A sleeve can outperform because the selected factor did well, because the security selection inside the factor did well, or both. Attribution separates those effects.

Why it helps optimization

Attribution turns a strong backtest into a question: did we earn return from repeatable factor exposure or from accidental stock picks?