Rating Methodology

Ballast uses a 7-dimension weighted scoring system to output a risk rating for each Hyperliquid vault. Our methodology is fully transparent — credibility comes from openness, not black boxes.

7-Dimension Scoring

01Risk-Adjusted Return

Weight 25%

Combined evaluation of Sharpe, Sortino (downside-only penalty), and Calmar (drawdown-penalized) ratios. Sortino is preferred; weight is reduced when data points are insufficient.

score = clamp(40 + 20 × Sortino)

02Real Drawdown

Weight 20%

Historical max drawdown + current depth below the peak (underwater). Score approaches 0 when max drawdown exceeds 50%; no penalty when currently at peak.

score = clamp(100 − MaxDD×200 − CurrentDD×100)

03Liquidity / Concentration

Weight 15%

Herfindahl index (HHI) measures position concentration: 1.0 = single asset, 0 = fully diversified. High concentration increases slippage risk on large withdrawals. v1 uses concentration as a slippage proxy (confidence 0.6).

score = clamp(110 − HHI×100)

04Leverage & Liquidation Distance

Weight 15%

Peak leverage multiple + buffer to liquidation price. Higher peak leverage and smaller liquidation buffer lower the score. Reflects liquidation risk in extreme market conditions.

score = clamp(100 − peak_lev×4 − (1−dist_liq)×30)

05Strategy Decay

Weight 10%

Detects three decay signals: ① declining rolling 30/60/90-day Sharpe slope; ② rapid AUM growth with falling per-unit alpha (scale dilution); ③ sudden change in trading fingerprint (strategy replaced). Any trigger is flagged red.

decay_index = avg(component_scores) × 100

06Blowoff Exposure

Weight 8%

Detects combined signal of high margin usage (>90%) and spiking single-position concentration (HHI>85%). Corresponds to historical incidents where whales dumped losing positions into the vault. v1 uses heuristic rules (confidence 0.4).

score = clamp(80 − 25 × flag_count)

07Transparency

Weight 7%

History length (≥180 days = full score) + known leader address (+10 pts) + follower count (≥100 = full score). Longer history, more public leader, and larger following makes the rating more credible.

score = 40 + min(days,180)/180×40 + known×10 + min(followers,100)/100×10

Grade Bands

Grade	Min Score	Meaning
AAA	≥ 90	Extremely low risk, excellent across all dimensions
AA	≥ 82	Low risk, high overall quality
A	≥ 74	Low-moderate risk, suitable for most conservative investors
BBB	≥ 66	Moderate risk, some dimensions warrant attention
BB	≥ 58	Moderate-high risk, consider setting alerts
B	≥ 50	High risk, requires thorough understanding of the strategy
CCC	≥ 40	High risk, clear warning signals present
CC	≥ 30	Very high risk, large allocations not advised
C	≥ 20	Extreme risk, data or strategy anomalies detected
D	≥ 0	Insufficient data or vault is closed

Risk Lights

🟢

Low Risk

Overall score ≥ 75·No major warnings across dimensions

🟡

Medium Risk

Overall score 50–74·Or any key dimension score < 50

🔴

High Risk

Overall score < 50·Clear risks present, proceed with caution

Limitations & Disclaimer

•Ratings are based on single-venue Hyperliquid on-chain data. Hedge positions the leader holds on other exchanges are not observable.
•Past performance does not guarantee future returns. Ratings update with new data every 30 minutes.
•These ratings are for informational purposes only and do not constitute investment advice or guarantee any returns.
•Methodology version: v1.0 (2026-05). Ballast will publicly calibrate rating accuracy each quarter.