RARE Methodology
RARE — Risk-Adjusted Relative Evaluation
This page documents SagaHalla’s performance evaluation framework: RARE — Risk-Adjusted Relative Evaluation.
RARE is designed to measure two things that most performance reporting blends together:
- How risk was deployed (behavior and governance)
- What outcome occurred, given that deployment
SagaHalla does not evaluate itself using outcomes alone.
Before we ask “did it work?”, we first ask:
Was risk deployed responsibly and coherently under the observed market conditions?
RARE is a methodology page.
It is not a promise of returns, not an investment recommendation, and not a substitute for independent due diligence.
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Why RARE Exists
Traditional performance metrics (e.g., CAGR, Sharpe ratio, maximum drawdown) are useful, but they often fail to separate risk governance from market outcomes.
A disciplined system can behave correctly and still experience unfavorable outcomes in adverse regimes.
Conversely, a system can take excessive risk and appear successful—until it doesn’t.
RARE is designed to keep these questions distinct:
- Behavior — Did the system deploy risk in a controlled, interpretable way?
- Outcome Efficiency — Given the deployed risk, how efficiently did equity evolve?
The Two RARE Metrics
RARE is implemented as two complementary measures:
- RARE-Q — Risk-Adjusted Relative Quality
(behavioral legitimacy & governance audit) - RARE-E — Risk-Adjusted Relative Equity
(outcome efficiency, conditioned on behavior)
Interpretation rule
RARE-E should never be interpreted in isolation.
It is always paired with RARE-Q to preserve context and avoid outcome-only storytelling.
RARE-Q — Risk-Adjusted Relative Quality
(Behavior & Governance)
RARE-Q evaluates how the Oracle behaved across observed market regimes.
It is a retrospective audit of discipline, coherence, and legitimacy, not a performance target.
What RARE-Q is answering
- Did the system behave coherently relative to prevailing regime integrity?
- Did it respect structural, volatility, and uncertainty constraints?
- Does realized behavior appear robust—or dependent on fragile conditions?
How to think about RARE-Q
RARE-Q is a governance and legitimacy metric.
It evaluates how decisions manifested over time, not whether they produced favorable results.
A high RARE-Q indicates disciplined, interpretable behavior across regimes.
A low RARE-Q flags potential instability, overreach, or incoherent participation.
RARE-E — Risk-Adjusted Relative Equity
(Outcome Efficiency, Under Constraints)
RARE-E measures how equity evolved relative to a transparent reference baseline,
conditioned on the risk that was actually deployed.
It evaluates outcome efficiency after accounting for drawdown discipline and participation restraint.
What RARE-E is answering
- Given the deployed risk, how efficiently did equity change?
- Did outcomes improve upon a passive reference (e.g., buy-and-hold)?
- Were drawdowns and participation proportional to achieved results?
How to think about RARE-E
RARE-E is an outcome efficiency metric, not a promise of returns.
It reflects whether capital use translated into relative equity improvement under constraints.
In some regimes, muted or delayed equity growth can be consistent with good governance.
How RARE-Q and RARE-E Work Together
RARE is intentionally two-dimensional:
- RARE-Q explains how risk was governed
- RARE-E explains what happened given that governance
A simple diagnostic mapping
- RARE-Q ↑ and RARE-E ↑
Disciplined behavior with efficient outcomes (ideal alignment) - RARE-Q ↑ and RARE-E ↓
Responsible behavior with adverse outcomes (often acceptable; investigate regime conditions) - RARE-Q ↓ and RARE-E ↑
Favorable outcomes achieved through fragile or poorly governed behavior (treat cautiously) - RARE-Q erratic
Regardless of RARE-E, investigate decision stability and constraint adherence
RARE reframes “performance” as a disciplined narrative about behavior and outcome,
not as a single score.
Baselines and Comparability
RARE is computed relative to an explicitly stated reference baseline
(e.g., buy-and-hold for the same asset or a transparent benchmark appropriate to the asset class).
The baseline used must always be stated alongside any RARE values.
This ensures interpretability and prevents hidden comparisons.
Transparency and Auditability
RARE is aligned with SagaHalla’s glass box philosophy:
- Every decision is documented in an Oracle Decision Report
- Exposure behavior is observable through conviction and equity allocation history
- Regime context is observable through integrity metrics and forward simulations
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Limitations and Disclosures
RARE is observational and retrospective.
It does not guarantee future results.
Markets change. Regimes are non-stationary.
Any evaluation framework can degrade if context shifts.
RARE should be interpreted alongside the underlying Oracle Decision Reports
and is not a substitute for risk management, suitability assessment, or professional advice.
Access and Reporting
This page documents the RARE framework philosophy. Specifics on methodology are forthcoming.
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