The redFLAG Index seeks to reflect the strength of the U.S. equities market
by leveraging the corporate ratings data of
redFLAG Analytics - an
independent ratings firm that implements quantitative models to detect Deceptive
Accounting Techniques (DATs), poor financial performance, and good financial
performance. The index is composed of over 7,000 individual data points which
represent the public companies that redFLAG currently covers. Companies are
given a company rating on a 1 to 5 scale, with 1 being "Very negative" and 5
being "Very positive." In addition to the overall company rating, redFLAG also
includes assessments of each company's earnings, sales, assets & liabilities,
and cash flow, which are based on the analysis of each company's 3 most recent
annual reports and 5 most recent quarterly statements.
In creating this index, Track.com has taken a weighted average of the overall
redFLAG rating for each company on a monthly basis in order to reflect the
underlying financial strength and integrity of publicly-traded corporations. A
higher redFLAG index score indicates a "healthier" market while a lower score
could be an indication that the market is distressed. The index has been plotted
against the performance of the S&P 500 to show their correlation.
