InsidersTradesSigma
Performance & Risk Metrics
The portion of a security's total return volatility that is driven by broad market or factor movements, calculated as the product of the security's beta and the market volatility.
Systematic volatility component represents the non-diversifiable risk inherent to market or factor exposure. It is formally derived by decomposing total volatility into systematic (beta-driven) and idiosyncratic (firm-specific) components. In a quant scoring framework, this metric isolates the contribution of broad market beta to observed price swings, enabling risk adjusters and portfolio managers to distinguish between market-correlated moves and security-specific events. During insider-trading surveillance, elevated systematic volatility can mask or amplify insider signals, necessitating normalization by regime or factor loadings.
The systematic volatility component is particularly relevant when scoring insider transactions in beta-heavy sectors (financials, energy) or during high-volatility market regimes. A trader's suspicious activity may be obscured if benchmark volatility spikes concurrently, requiring conditional scoring that separates systematic moves from abnormal insider-linked price action. Conversely, in low-volatility periods, the same systematic component may be negligible, elevating the relative signal strength of insider trades.
Formula