TIME SERIES PERFORMANCE CALCULATIONS / SCREENED GROUP REPORTS / VALUE AT RISK
PIQ provides a number of reports that show how a company has performed historically.
These reports can compare companies, indices and sub-industry groups.
PIQ also provides a series of Value and Fundamental tabular reports to enable investors to review their screen results.
1. SINGLE SECURITY VALUE AT RISK (VAR)
Value at Risk is a statistical concept that communicates to investors the potential for losses or gains for a given security over a given amount of time. Stocks and most ETFs theoretically increase in value over time. While increasing value is generally true it seldom occurs in a straight line. There are periods of time where investments will demonstrate variability in value. This simply means that from time-to-time, investments lose value.
Value at Risk calculations use an investment’s return prole to forecast how much value may be lost over a targeted period. It presents this forecast with a targeted degree of certainty. PIQ’s model measures the loss (or gain) potential of a $100.00 investment, over a 2 year period.
The table above indicates a 24 month (the default) projection period and will compare the target investment against the S&P 500. The investor has also chosen 95% as the confidence level.
This means that they want to know, with 95% certainty, the minimum value their $100.00 investment could be in 24months.
A sample analysis is below. In this case the investment is Cisco (CSCO) and it is being compared to the Value at Risk of the S&P 500.
The chart above is read as follows; If an investor buys $100.00 in the stock of CSCO there is a 95% chance that the most they would lose over 24 months is almost $40.00. This compares to the benchmark’s potential loss of $15.00 over the same period. While both CSCO and the benchmark have positive expected return, the variability of their returns suggest that they could experience a down-draught over this period and the historic return would not be enough to see full recoveries. Further, and perhaps more importantly, it also suggests CSCO has much higher variability. As a single stock it has more Value at Risk than the market as a whole. VAR models are most valuable for portfolios of investments and Exchange Traded Funds.VAR implicitly takes into consideration the interactions of the individual investments being held. For single securities it provides an interesting comparison of specific volatility.