I’m still working on this time-consuming and annoying optimisation process of ranking systems, just to learn of the prosess on how to best put RS together.

I did a test with 150 nodes, which I believe in, where I started the RS without any composite nodes and just the Small Cap Focus RS. Then I added one and one of my own nodes. And I ran the simulator on the full US Canada universe (with a liquidity rule). If it did better, I kept the node, and if it did worse, I set it to 0%. I ran it with the full history, and with 25 stocks. And each new node should at least weigh more than 1%.

Then I did the opposite. I added all 150 to the 39 that are already in the Focus RS. Here I equally weighted each of the 150, so that, in total, that part of the RS did not have more than 50%, and each node got around 0.35%. Then I set each to 0%, ran the simulator, and kept only the ones that made the performance better.

And Yes, I know, this is overfitting. And the performance difference could be something of a coincidence.

The surprising thing is still that the last method did far better than the first one. Not just in total performance but also in the performance increase through the process. **Anyone who has a good explanation of why the difference?**

It seems that a large part of building a RS is not only finding nodes that make sense but also understanding how factors interact with each other.