After two days of Bernanke and the Congress getting along so well,
the S&P 500 is at a new high and markets around the world are
rallying. And earnings are up, above
expectations anyway. It is enough to
put risk back on our minds and nobody offers more comprehensive risk analytics
on exchange traded products than ETF Global®. Quant is undeterred as today’s top 10 are
skewed towards higher risk issues bringing their average Red Diamond Risk Rating
up to 5.53 compared to today’s all equity ETF average of 4.83, both numbers are
higher than usual. For example, today’s
9th place EGShares India Consumer Fund (INCO) gets an excellent 9.61
Green Diamond Reward Rating but it carries high risk with a 7.72 Red Diamond
Risk Rating. That is in the neighborhood
of leveraged and inverse funds which you can see on the Red Diamond Risk
Rating page found under the Analytics button.
The page appears with the highest Risk Ratings up top but you can
sort by any of the six subcategories or ticker or description. Entering INCO in the search box will winnow the
list to the products containing those letters (in this case including a bunch
of income funds). Behind the six sub categories are 15
proprietary calculations of dozens of daily metrics reflecting a product’s integrity
and historical price data.
Looking closely at INCO we can see the biggest driver of its 7.72 Risk
Rating is its high Liquidity Risk at 9.67 resulting from its wide bid ask
spread and low trading volume, so use limit orders when trading it. If you are more interested in price risk you
will notice its 6.15 Volatility Risk is higher than its 4.9 Deviation Risk
suggesting this would be a good way to ride a rally. The elevated Country and Structure Risk
reflect India’s quantitative ranking in our models and the fund holding only 30
constituents with one accounting for more than 10% of AUM.
ETFG® Risk Ratings are
reflective of a product’s composition and trading but not predictive like our Quant
scores and Reward Ratings. Also unlike
the other models, the Risk Ratings apply to all exchange traded products like those
leveraged and inverse ones in INCO’s neighborhood. Only ETF Global® breaks out risk from reward and offers such granularity in how we
reach our ratings. Please send any
questions to support@etfg.com and have a
nice weekend.
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