Methodology · Correlated Equity Score

What the score measures

The Correlated Equity Score is a 0–100 rating of how closely a company's executives and directors are tied to outside shareholders through their own money. It asks three questions: do insiders own meaningful stakes, have they been buying with their own money recently, and where does today's price sit against what they paid.

Every metric is computed from structured data: Form 4 insider filings, XBRL financial facts, the proxy's Summary Compensation Table, and the daily close. The same filings and price on the same date always produce the same score. Scores are recomputed after each nightly filing check and a new snapshot is published whenever any metric's points change.

What it does not measure: valuation, business quality, management competence, governance policies, or near-term price direction. It is not a prediction of returns, not a judgment about any individual's integrity, and not a substitute for reading the filings.

15 of 34 covered companies are scored, across 17 published snapshot(s).

Tiers

Score	Tier	What it means
80–100	Strongly aligned	Insiders own large stakes, keep buying with their own money, and paid near or above today's price
65+	Aligned	Meaningful ownership and buying, with some gaps
50+	Mixed	Some ownership or buying, offset by selling, small stakes, or a price well above insider cost
0+	Misaligned	Little insider ownership or buying; insiders are not sharing outside shareholders' risk

The colour scale is a single hue rather than red-to-green, because a tier is a description of alignment, not a buy or sell signal. The tier name always appears with it.

Rubric v2.0

5 components, weighted to 100 points

A Skin in the game 20 points

How much the CEO and the insider group own, measured from their own Form 4 holdings.

A1 CEO stake as a multiple of cash pay 12 points

What are the CEO's Form 4-reported shares worth, as a multiple of their annual cash pay?

A CEO whose stake is worth many years of cash pay feels share price moves personally. One worth less than a year's pay mostly doesn't.

Band	Points
20x or more	12
10x to 20x	10
5x to 10x	7
2x to 5x	4
Below 2x	1

Convention: Shares are the CEO's latest reported holdings across every non-derivative line (direct and each indirect holding), valued at the score's price. Cash pay is salary plus bonus plus non-equity incentive from the CEO's row in the latest proxy's Summary Compensation Table.

Not applicable when: No CEO could be identified from Form 4 titles, or the proxy's Summary Compensation Table couldn't be read for them.

A2 Insider group ownership 8 points

What share of the company do current directors and officers own, by their Form 4 holdings?

Meaningful group ownership aligns the people running the company with outside holders. Above roughly 30% the benefit fades: controlling insiders can't easily be challenged.

Band	Points
Below 0.25%	0
0.25% to 1%	3
1% to 5%	6
5% to 30%	8
30% to 50%	6
50% or more	5

Convention: Sum of every current director's and officer's latest reported non-derivative holdings, divided by shares outstanding from the latest XBRL cover-page count.

B Bought, not granted 15 points

Whether insiders put their own money in through open-market purchases, or only hold what they were awarded.

B1 CEO shares bought in the open market 8 points

What share of the CEO's current holdings did they buy in the open market in the last five years?

Shares a CEO paid for with their own cash carry a different message than shares they were granted.

Band	Points
25% or more	8
10% to 25%	6
1% to 10%	3
Below 1%	0

Convention: Form 4 code P shares bought by the CEO in the last five years over their current holdings, capped at 100%.

Not applicable when: No CEO could be identified from Form 4 titles, or the CEO reports no holdings.

B2 Insiders who bought in the open market 7 points

How many directors and officers bought shares in the open market in the last five years?

Buying by several insiders is a broader signal than one person's purchase.

Band	Points
Four or more	7
Two or three	5
One	3
None	0

Convention: Distinct reporting people with at least one Form 4 code P purchase in the window.

W Above or below water 30 points

Where today's price sits against what insiders paid in the open market, and whether they still hold those shares. A price below insider cost is a better entry than insiders got.

W1 Price versus insider purchase cost 18 points

How far is today's price above or below the average price insiders paid in the open market?

When the stock trades below what insiders paid with their own money, outside buyers get a better entry than the people with the most information did.

Band	Points
20% or more below insider cost	18
5% to 20% below insider cost	15
Within 5% below to 10% above	11
10% to 30% above insider cost	7
30% to 75% above insider cost	3
More than 75% above insider cost	0
No open-market purchases in five years	0

Convention: Each insider's average code P purchase price over the last five years, weighted by the purchased shares they still hold (capped at their current holdings). If every purchased share has since been sold, all purchases are used. Negative means the price is below what insiders paid.

W2 Purchased shares still held 12 points

What share of the stock insiders bought in the open market in the last five years do they still hold?

Insiders who keep what they bought are still sharing the outcome with you.

Band	Points
90% or more	12
70% to 90%	9
50% to 70%	6
25% to 50%	3
Below 25%	0
No open-market purchases in five years	0

Convention: Shares bought with code P, capped for each person at their current holdings, over total shares bought.

C Recent buying trends 25 points

Over the last 24 months: are insiders net buyers or sellers, how many bought together, and how recently.

C1 Net insider buying 10 points

Over 24 months, were insiders net buyers or net sellers, relative to what they own?

Selling a small fraction of a large stake is normal. Steady selling of a large share of it is a signal; buying is a stronger one.

Band	Points
Net buyers	10
Net selling under 2% of holdings	8
Net selling of 2% to 10%	5
Net selling of 10% to 25%	2
Net selling of more than 25%	0

Convention: Open-market purchases minus discretionary sales minus half of 10b5-1 plan sales, in dollars, over the current value of insider holdings. Grants, option exercises, RSU settlements, tax withholding, and gifts are excluded.

Not applicable when: Current insiders report no holdings to compare the flow against.

C2 Option exercises sold the same day 3 points

Of options exercised in the last 24 months, what share were sold the same day?

Exercising and immediately selling turns options into cash pay rather than ownership.

Band	Points
25% or less	3
25% to 60%	1
More than 60%	0

Convention: An exercise counts as sold the same day when the same person reports sales of at least 90% of the exercised shares on the exercise date. RSU settlements are not option exercises.

Not applicable when: No insider exercised options in the window.

C3 Conviction buying 5 points

In the last 24 months, was there a cluster buy, an officer purchase, or only director purchases?

Several insiders buying together, or an executive buying, carries the most information.

Band	Points
Cluster buy (3+ insiders within 30 days)	5
An officer bought	3
Only directors bought	2
No open-market purchases	0

Convention: A cluster buy is open-market purchases by three or more insiders within 30 days.

C4 Officer sales outside 10b5-1 plans 3 points

In the last 24 months, did officers sell outside 10b5-1 plans, and how much of their stake?

Discretionary selling by executives is the clearest negative insider signal.

Band	Points
No discretionary officer sales	3
Some, each under 10% of the officer's stake	1
At least one officer sold more than 10%	0

Convention: Each officer's discretionary sales over their holdings before those sales (shares owned after the first sale plus the shares sold).

C5 Most recent open-market purchase 4 points

How many days before the data cutoff did an insider last buy in the open market?

A recent purchase reflects insiders' view of today's price, not last cycle's.

Band	Points
Within 90 days	4
Within six months	3
Within a year	2
Within two years	1
More than two years ago	0
No open-market purchases in five years	0

Convention: Days from the latest code P transaction date in the last five years to the data cutoff.

F Dilution cost 10 points

How much equity compensation costs outside shareholders, from the company's XBRL financial data.

F1 Stock-based compensation versus market value 6 points

What is the latest fiscal year's stock-based compensation as a share of market value?

Stock compensation is a real cost to existing holders, paid in dilution.

Band	Points
0.5% or less	6
0.5% to 1.5%	5
1.5% to 3%	3
3% to 5%	1
More than 5%	0

Convention: Latest annual ShareBasedCompensation (or AllocatedShareBasedCompensationExpense) from XBRL over shares outstanding times the score's price.

Not applicable when: The company reports no stock-based compensation fact in XBRL.

F2 Diluted share count growth 4 points

How fast has the diluted share count grown over the last three fiscal years?

A rising share count shrinks every holder's slice of the company.

Band	Points
Flat or shrinking	4
Up to 1% a year	3
1% to 3% a year	1
More than 3% a year	0

Convention: Compound annual growth of annual WeightedAverageNumberOfDilutedSharesOutstanding over up to three years. Buybacks that shrink the count score best.

Not applicable when: Fewer than two fiscal years of diluted share counts in XBRL.

A component's score is the sum of its metric points. If a metric's inputs don't exist (no CEO identified, no XBRL fact), it is not applicable and the component is rescaled so its weight is preserved: earned points × weight ÷ applicable maximum. If a whole component is not applicable, the total is scaled the same way over the remaining weight. Activity that simply didn't happen, such as no insider purchases in five years, is not missing data: it scores the band shown. The total is clamped to 0–100 and rounded to one decimal.

Conventions

Insiders: Reporting people flagged as a director or officer on a Form 4 at the company. 10% owners that are neither (funds, holding companies) are excluded. Current insiders are those who filed in the last 24 months.
CEO: The current officer whose most recent Form 4 title names them chief executive officer.
Holdings: For each holding line (direct, and each kind of indirect holding), the shares-owned-after figure from the person's most recent non-derivative Form 4 line. Options and unvested units are excluded.
Price: The latest daily close on or before the data cutoff, used for every value in the score.
Open-market purchase: Form 4 code P only.
Plan sale: A sale with the 10b5-1 box checked or a footnote stating it was made under a 10b5-1 plan. Counts at half weight in net buying.
RSU settlements: Code M at zero price. These are not option exercises.
Windows: Measured back from the data cutoff: 24 months for recent buying trends, five years for purchase history and insider cost.
Missing data: A metric whose inputs don't exist is left out and the rest of its component is scaled up to the component's weight. If a whole component is missing, the total is scaled the same way.

Research basis and limitations

Academic research has found a relationship between insider ownership and firm performance, but it is not linear. Performance tends to improve with ownership up to a point, then flatten or decline as insiders become entrenched (Morck, Shleifer and Vishny 1988; McConnell and Servaes 1990). Causality is debated. Open-market purchases by insiders, especially clustered ones, have been found to carry more information than sales (Lakonishok and Lee 2001; Cohen, Malloy and Pomorski 2012).

The rubric reflects this: it measures stakes relative to pay, weights purchased shares above granted ones, steps down its top ownership band, treats 10b5-1 plan sales at half weight, and rewards a price at or below what insiders paid, since an outside buyer then gets a better entry than the best-informed buyers did.

We will publish backtests of the score once enough timestamped history exists. Until then, no claim is made about the score's predictive power.

Data sources

All company data comes directly from SEC EDGAR — no third-party data vendors. Prices come from Correlated's own price feed.

Form 4: every insider transaction, parsed line by line and classified (open-market purchases, sales inside and outside 10b5-1 plans, option exercises, RSU settlements, tax withholding, and grants), plus each filer's relationship (director, officer and title) and reported holdings.
DEF 14A (proxy statement): the Summary Compensation Table, for the CEO's cash pay.
XBRL company facts (data.sec.gov): shares outstanding, stock-based compensation, and diluted share counts.

How to read a scorecard

In 60 seconds

Check the tier and the verdict. The verdict says whether insiders have been net buyers and where the price sits against their cost.
Look at the component bars. Two companies can both score 65 for very different reasons.
Check the dates. The price and data cutoff are shown on every scorecard.
Open a metric. Every value shows its arithmetic and the filings behind it.

Using the score well

Compare within a sector. Ownership levels vary by industry and company size.
Watch the trend. A rising score through insider buying can matter more than the level.
Look at who is buying. A CEO buying with personal money is a different signal from a director buying a small amount.
Treat it as one input. The score measures insider alignment, not valuation, business quality, or near-term price direction.

Change log

v2.0 Current Fully automated: 5 components and 13 metrics, all computed from Form 4s, XBRL data, the proxy's Summary Compensation Table, and the daily close. Weight moved to insider ownership, open-market buying, and price versus insider cost. Pay design, governance policies, and red flags, which needed a reviewer's judgment, were removed.
v1.0 Retired Hand-graded rubric: seven components, 26 scored metrics, five red flags.

A rubric change never silently restates history: published snapshots record the version they were scored under, and a rescore under a new version is published as its own snapshot.

Corrections and issuer requests

No corrections have been requested or made.

Anyone, including a covered company, can submit an evidence-based correction request from any metric page. Every request and its outcome is logged here, whether or not it changed a score.

Independence and conflicts

Companies cannot pay to be rated, cannot preview a score before publication, and cannot have a score removed.
Scores are computed by the published method with no manual adjustment, and attributed to Correlated Equity Research.
Publication timestamps are recorded to support a trading blackout policy around publication.

FAQ

Why does a price below what insiders paid score higher?

Insiders know more about their company than anyone. If they bought with their own money at a higher price than today's, an outside buyer gets in for less than they did. A price far above insider cost means the insiders' conviction was expressed at a much lower valuation.

Why did a company with high insider ownership still score low?

Ownership is only one of five components. A company whose insiders own a lot but haven't bought in years, are selling steadily, or are sitting on large gains scores lower on buying trends and on the water component. Very high ownership also steps down rather than up, because it can entrench insiders.

Why do sales under a 10b5-1 plan count for less?

A plan sale is scheduled in advance, so it carries much less information about what an insider thinks today than a discretionary sale does. It counts at half weight rather than zero, because the decision to schedule selling is still a decision.

Why aren't pay design and governance policies scored?

Reading them takes judgment: whether a clawback is meaningful, or whether performance goals are rigorous. Version 2.0 scores only what can be computed exactly from filings, so anyone can reproduce every number.

The Correlated Equity Score describes how closely insiders' interests are tied to outside shareholders, based on public SEC filings. It is not investment advice or a recommendation to buy or sell any security.