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The Alpha Premium Driving non-linear returns

The Modelomni Alpha Premium is defined as the risk-adjusted outperformance achieved against a benchmark by compounding realised gains, and by setting a synthetic floor against market drawdowns to create a highly asymmetric return profile.

We achieve this by systematically removing volatility from the portfolio, dynamically entering and exiting the market as conditions dictate.

Alpha Premium (AP) Ratio   =

RM − RB
(βdown × Eavg) × σdown,B
Alpha Generation
RM
The annualised return (unrealised and realised) of the strategy executed with Modelomni (M)
RB
The annualised return (unrealised and realised) of the strategy executed without Modelomni – the benchmark (B)
Active Risk Multiplier
βdown
Downside Beta. The extent to which Modelomni participates in the strategy's negative movements
Eavg
Average Active Exposure. The percentage of capital actually deployed by Modelomni, rather than held as cash
σdown,B
The annualised downside standard deviation of the strategy (B) executed without Modelomni (to allow for standardised comparison across strategies)

Building upon the Sortino Ratio, the Alpha Premium Ratio evaluates outperformance not against standard market turbulence, but against the benchmark's effective downside volatility. This is calculated by explicitly scaling the benchmark's downside risk by the model's active downside beta (βdown) and its average active exposure (Eavg). By engineering asymmetry during drawdowns and mitigating risk via tactical cash sweeps, the model shrinks this effective risk, systematically amplifying the ratio.

Delivering Alpha Premium

We do this by minimising volatility from the portfolio – entering and exiting the market as conditions dictate.

The AP Ratio demonstrates that our outperformance is driven by structural risk mitigation, not amplified market beta. It explicitly rewards tactically-harvested gains and actively-generated downside alpha during periods of market stress.

We use Alpha Premium (AP) in conjunction with absolute alpha generation (RM – RB) and intraday max drawdown (MDDid) to drive the alpha generation capability of our technology.