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Medium · backtesting · Quant Researcher interview question · backtesting, ic, information-ratio, spearman, scipy, factor-research
The Information Coefficient (IC) measures the rank correlation between a factor and subsequent returns, while the Information Ratio (IR) assesses its consistency. Quantitative researchers compute rolling IC diagnostics to monitor a factor's predictive power for decay or regime changes. Spearman's rank correlation is standard for this analysis due to its robustness to outliers and non-linear relationships. Task Implement the function solution(factor_scores: list, forward_returns: list, window: i