A month ago, the talk was all about our low tail risk environment where earnings either improve or Fed liquidity would make up the difference. Then we began last week by breaking through a month long down-trending resistance line and it looked like the 3.5% correction was about as much as we would see. We also heard talk then about Boston in 6 and it looked like Tuuka Rask would make it happen in 7 as late as 2 minutes to go last night. But like a puck contacting Jonathan Toews’ hockey stick, Mr. Market has a way of upsetting the conventional wisdom. Now equities are back below that resistance line as well as a rising support line from November. Bruins fans are stunned to watch the Blackhawks hoist the silver in their Garden and we are all looking at the risks we are taking in our portfolios.
ETF Global’ssm predictive scores and ratings have a proven ability to identify the best performing equity ETFs but our reflective Risk Ratings apply to all exchange traded products. Appearing under the Analytics button, the ETFG Red Diamond Risk Ratingssm page breaks out every product’s full rating into six sub categories. Volatility and Deviation are both compilations of various industry standard metrics with emphasis on downside deviation. Country Risk is an example of our Diamond models borrowing from Quant but separating risk from reward. Structure also borrows from Quant and adds further proprietary data points. A large diverse fund gets a lower Structure Risk score than a small one that owns futures; swaps are scored even higher and with risk, lower is better. Liquidity also borrows from Quant addressing trading volume and spreads, and Efficiency looks at tracking error and expense ratios.
We break them out because managers want to emphasize certain risks at certain periods. Some will want to stitch up their faces like Andrew Shaw and get back on the ice to ride any rebound as far as it can go. They can sort to see those products with the highest Volatility Risk by double-clicking the header. Whatever kinds of risk you are managing, the ETFG Red Diamond Risk Ratingssm give you the information and analytics you need to decide how to play the puck. Thanks for reading and congratulations to the Chicago Blackhawks for getting some more of their names on Lord Stanley’s Cup.