IPO India Information (BSE / NSE)

Friday, August 30, 2013

Beta and Correlation

It was my 2nd class of risk management yesterday. During a calculation I saw that  beta's formula  is identical to correlation. Searched out some resourceful stuff form internet.
  Beta Definition
Beta is a measure of the systematic, non-diversifiable risk of an investment
A misconception about beta is that it measures the volatility of a security relative to the volatility of the market. If this were true, then a security with a beta of 1 would have the same volatility of returns as the volatility of market returns.  In fact, this is not the case, because beta also incorporates the correlation of returns between the security and the market.
    Beta = Correlation of Asset to Market * (Std Dev of Asset / Std Dev of Market)       
For example, if one stock has low volatility and high correlation, and the other stock has low correlation and high volatility, beta cannot decide which is more risky.
Beta sets a floor on volatility.  For example, if market volatility is 10%, any stock (or fund) with a beta of 1 must have volatility of at least 10%.
Another way of distinguishing between beta and correlation is to think about direction and magnitude. If the market is always up 10% and a stock is always up 20%, the correlation is 1 (correlation measures direction, not magnitude).  However, beta takes into account both direction and magnitude, so in the same example the beta would be 2 (the stock is up twice as much as the market).
Correlation Definition
Correlation – measures the degree to which two variables relate to each other.  It’s a standardized measure (unlike Covariance) of the strength of the linear relationship between two variables.  When you say that two items are correlated, you are saying that the change in one item effects a change in another item.
    Correlation = Covariance of Asset to Market / (Std Dev of Asset * Std Dev of Market)
Beta and Correlation both measure the relationship between 2 variables. If you study the formulas you will see that correlation is just covariance expressed as a normalisation of covariance - that is it is scaled by the standard deviations of the 2 variables. Beta is however the Covariance of the 2 assets divided by the variance of the benchmark asset.

Intuitively what it really means is Beta is distinct from correlation in that correlation is more indicative of direction, while beta is also incorporating magnitude. If we say a market is up 15% always and the stock is always up 30%, then the correlation will be 1. However as beta gives us both the direction and the magnitude we would get a beta of 2.
Source:


Friday, August 23, 2013

Gold; Where is it?

Gold has become a huge political issue. In spite of many artificial measures to stop import of gold, government has miserably failed. This eventually led to the domino effect in the entire Indian Financial Markets.


We are currently seeing Gold at upper level the RSI is giving a caution signal and we have 2 major resistances ahead. It’s a high time for gold, the trend-line which was broken by gold during the end of March and the upper level resistance @32,500.

We are seeing signals from gold of a possible correction. Which will start from the first week of next month or prior. 

If gold is able to give a breakout and sustain the breakout gold is again a screaming buy.

For previous article on gold; Click Here

Sunday, August 4, 2013

Jetairways; an Analysis

Most of the aviation stocks are at a downtrend, few hit badly. I am seeing Jet airways to be a potential stock. it is forming a falling wedge along with it we are seeing divergence. The stock has even given a per-mature breakout. The target are showen above in the figure. If the stocks fail to give a breakout the stock is expected to find support at 275 

Monday, July 22, 2013

High Profitability Trading

When it comes to ultimate trading system; everyone are interested to know about. Obviously it is one of the curious topic discussed form centuries. Everything started form plotting “X” and “O” on cigarette packs or placing candles on a sand table.  Technical Analysis grew as an industry without even realizing.

We have witnessed many things in these times Black–Scholes, quant, expert system, cutting edge software’s, back testing and  dozens & dozens of indicators. Let me come again, where are we today. A time we are bombarded too many techniques, models, strategies and methods. Few sold over courses and coaching’s few are shown on YouTube few kept hush-hush.  Ultimately, today we leave in a world where we have too many techniques to follow too many indicators been invented few paid, few unpaid, few reliable and few aren’t.

After spending centuries of time, and spending huge amount of money. What we have found? Is it an ultimate trading system? The answer is no and we won’t find it until we understand the simplest things of stock market. That’s volatility, price and volume; all these are the basic pillars of technical analysis. Any indicators, trends, patterns follow these basic principles of markets.
Stock market is not a Pandora box it’s a simple demand and supply. There is nothing called as high profitability trading technique, every system have its own risk. Risk and reward are the basic inherent variables of any trade using a system. Remember, every system have certain risk even a risk free model such as Black–Scholes model also had a risk with it. Ultimately we are left with models which can be applied the only thing that you have to know is when to apply.

I love Kung-fu Panda, the most loved part in that movie is “nothing”. The soup-noodles isn't made up of a special ingredient nor there is any special description about martial arts on dragon scroll. Similarly we have left out with nothing in stock market. I have literally seen peoples who make money only using candle sticks and moving averages. And they are doing well, I regularly hear about a marwadi in Bangalore who use manual tools for predicting market. And that man is well-known for accuracy. How did he do that? It is nothing but shear dedication towards market.



This Sunday I was able to interact with an interesting man he is very close to Indian army. He told “Any army in the world have an average IQ. It isn’t an IQ that make that difference, it the discipline”. Larry Berman told something similar “I am a technical analyst; I have people to punch my orders”. Guys, any bullshit can make money out of market and we have good examples for that: Turtles, Million Dollar Traders (documentary) and many more. In an official blog of Rakesh Junjunwala described “people laughed at me when I told I want to be in stock market”(When Rakesh took a decision to start trading in his college days).


Coming again, we have nothing called as high profitability trading. If there is so than its you. And only you.

Wednesday, June 12, 2013

Strategy For Gold: Technical Analysis on Request

My last article on gold told about gold coming up to 28k. I was write and the gold have reached 28k, filling the gap.
If gold start correcting after this gap filling we may see a support at 27,300-27,400. if the support fail we may see it coming to a support at 26,400-276,500. Gold is a hold


Click here for previous article on gold

Thursday, May 23, 2013

Technical analysis on Request: Gold


Gold is forming a kind of symmetrical triangle and gave a bullish breakout. Gold will rise around 28k levels and find some resistance. If it manages to go above 29k gold will be on a bull run.