The Geometry of Alpha
What compounds is not a recipe but the factory that keeps producing, validating, and retiring signals, and the geometry that explains why many weak, independent signals beat one strong one.
Key ideas
Combining many weak signals works only if they are truly independent; correlation collapses the effective count, so independence is worth more than the strength of any one signal.
Every candidate must have known factor exposures stripped before it is called alpha, and the residual must still hold out of sample, net of cost, and in the tail.
The durable edge is a factory that keeps producing and honestly validating orthogonal directions and records every rejection, because individual signals decay and get crowded out.
Written by Wayland Zhang, founder of Dnalyaw.