> ## Documentation Index
> Fetch the complete documentation index at: https://docs.chicago.global/llms.txt
> Use this file to discover all available pages before exploring further.
# Integrating Factor Evidence
> What Parallax factor scores add to a valuation thesis, and the questions they cannot answer
Parallax factor scores compare a security's return and risk characteristics against a global investment universe. They answer a different question from DCF and peer valuation, and they are kept in that separate role.
## The Economic Question
Does the stock exhibit characteristics that have historically been associated with return, resilience or near-term opportunity?
The six Parallax dimensions are Value, Quality, Momentum, Defensive, Size and Tactical. Scores run from 0 to 10, with higher scores more supportive. Size is expressed through portfolio construction rather than through the stock-level overall score.
## First-Principles Derivation
A factor score is a relative rank assembled from multiple signals.
`Factor score = rounded relative rank of a precision-weighted signal ensemble`
Because the displayed component scores are rounded and the combination runs on the underlying ranks, an overall score cannot be reproduced exactly by recombining the numbers on the page. The components tell you where the evidence is strong and weak. They are not a worksheet for recomputing the total.
Value compares price with fundamentals. Quality tests profitability, balance-sheet strength, cash conversion and accounting quality. Momentum measures intermediate price and earnings direction. Defensive measures low-volatility and resilience characteristics. Tactical captures shorter-lived liquidity, flow and event conditions. Size influences attention, liquidity and implementation.
The score can support or challenge a valuation thesis. It cannot produce a price target, because it does not forecast company cash flows and does not specify a discount rate.
## What Each Factor Contributes
| Factor | What it contributes | What it cannot establish |
| ------------- | ----------------------------------------------------------------------- | --------------------------------- |
| **Value** | Relative cheapness across several fundamental measures | Intrinsic value or a catalyst |
| **Quality** | Profitability, cash-flow quality, balance-sheet strength and durability | A guarantee that quality persists |
| **Momentum** | Intermediate price and earnings direction | Long-run business value |
| **Defensive** | Lower volatility, resilience and downside characteristics | Upside growth |
| **Tactical** | Near-term flow, liquidity and event evidence | A standalone investment thesis |
| **Size** | Attention, liquidity and portfolio-construction effects | A stock-level recommendation |
The overall score combines the stock-selection factors under a controlled weighting process. Reconciliation uses the overall recommendation together with the strongest and weakest component evidence. It does not reinterpret an unavailable score, and it does not use a factor label as a substitute for data.
## A Worked Reconciliation
An issuer trades at 100.0. Its DCF range is 80.0 to 120.0 and the peer range is 95.0 to 130.0. Factor scores are Value 8.0, Quality 4.0, Momentum 3.0, Defensive 7.0 and Tactical 6.0, with an overall score of 6.4.
The correct reading is conditional:
* **DCF** says the current price sits inside the independently supported operating range.
* **Peers** say the market prices related companies at a somewhat higher range.
* **Value** supports relative cheapness and **Defensive** supports resilience.
* **Momentum** says the market has not confirmed the thesis over the intermediate horizon.
* **Quality** remains the central fundamental weakness.
No arithmetic average of these numbers improves the conclusion.
## Interpretation Note
Factor Value measures relative characteristics, while DCF values a company under specified operating assumptions. A high Value score can coexist with a lower intrinsic estimate. Compare sector valuations, earnings sustainability and balance-sheet strength to understand the difference.
## How to Assess the Result
For each factor, ask whether the score measures the same horizon and economic object as the valuation conclusion.
* A Momentum conflict may be a timing question.
* A Quality conflict may challenge margins or the fade period.
* A Defensive conflict may challenge position sizing rather than fair value.
* A Value conflict may reveal that peer and DCF denominators sit on different accounting bases.
## When to Reassess
The score is stale or unavailable; the scale is misread; the strongest and weakest components are not cited; or the narrative converts a relative rank into a cash-flow forecast. A factor conclusion also fails when the underlying signal is structurally inappropriate for the company's archetype.
## How Parallax Applies This
Parallax carries factor date, scale, recommendation and component scores into reconciliation. It names the strongest and weakest evidence, and explains whether they support, complicate, or sit outside the valuation thesis. Factor evidence never establishes an intrinsic range, and it is never blended into a composite fair value.
**Research finding.** Describes exposures and statistical relationships, not returns or performance. Not investment advice.
The information and opinions in this report were prepared or are disseminated by **Chicago Global Capital Pte Ltd**, regulated by the **Monetary Authority of Singapore**.
This report is **not intended to, and does not, constitute an offer or solicitation** to buy and sell securities or engage in any investment activity. This report is for **informational purposes only**.
Statements in this report are not made with respect to any particular investor or type of investor. Securities, financial instruments, or strategies mentioned herein may not be suitable for all investors, and this material is not intended for any specific investor and does not take into account an investor's particular investment objectives, financial situations, or needs.
Chicago Global Capital recommends that investors **independently evaluate particular investments and strategies**.
Detailed implementation of each of the six factors.
Where price behavior informs timing, sizing and risk.