Juncture to Assess Risk

With the State of the Union Address comes a variety of debates around challenges, strategies and opportunities for our Country and economy.  We all hope for the most immediate and constructive resolutions to these big impact issues, but in the interim, junctures like these provide the opportunity to update our understanding of the risk inherent in our respective portfolios.

For those that hold Exchange-Traded-Funds, our Red Diamond Risk Ratings are meant to do just that.  The ETFG Red Diamond Risk Ratings measure two primary risk categories:  Price Risk and Integrity Risk which are equally weighted in the overall risk rating. 

Price Risk calculates 7 equally weighted underlying measurements covering such aspects as volatility and deviation.  Integrity Risk calculates 8 equally weighted underlying measurements regarding the structure and trading characteristics of the security and the quality of its sponsor. 

For Portfolio and Wealth Managers, perhaps the most useful application for Risk is the ETFG Portfolio Tearsheet which allows up to 12 ETPs to be aggregated into a weighted average Tearsheet and provides a comprehensive reflection of the portfolio including overall Risk & Reward Ratings.

10 Highest Risk Ratings (Unlevered/Non-Inverse) as of 1/28/14

Ticker	Name	Focus	Region	Risk
SILJ	PureFunds ISE Junior Silver Small Cap Miners/Explorers ETF	Basic Materials	Global	9.20
TAN	Guggenheim Solar ETF	Theme	Global	9.02
GLDX	Global X Gold Explorers ETF	Basic Materials	Global	8.84
KWT	Market Vectors Solar Energy ETF	Theme	Global	8.78
RPX	Columbia RP Growth ETF	Broad Equity	North America	8.73
CVOL	C-Tracks Linked to the CVOLT Index ETN	Volatility	North America	8.69
MOM	QuantShares U.S. Market Neutral Momentum Fund ETF	Long/Short	North America	8.45
EEH	ELEMENTS Linked to the SPECTRUM Large Cap U.S. Sector Momentum Index ETN	Large Cap	North America	8.38
FLN	First Trust Latin America AlphaDEX ETF	Broad Equity	Latin America	8.36
TCHI	RBS China Trendpilot ETN	Broad Equity	Asia-Pacific	8.35

The Overall Risk Rating is aggregated and carried two decimal places to generate the ETFG Red Diamond Risk Rating.  A 1 Red Diamond Risk Rating represents the ETFs with the lowest risk ratings and a 10 Red Diamond Risk Rating represent the ETFs with the highest risk rating.  The summary page for the ETFG Risk Ratings ranks all outstanding ETPs, including levered and inverse, by both their overall risk scores as well as each underlying category. 

The search box on our site allows for a quick look-up of any ETP of interest.  Of course, you can also access the Red Diamond Risk Ratings for individual ETPs via their ETFG Tearsheet.  Lastly, for more background on the calculation method and underlying components of the overall ETFG Risk Scores, please take a look at About ETFG Risk and Reward Ratings.

Thank you for reading ETFG Daily Perspectives.