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Message-ID: <36327811.84EC0DB4@xxxxxxxxx>
Date: Sat, 24 Oct 1998 19:00:02 -0600
From: Leo Karl <leokarl@xxxxxxxxx>
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To: TradeLab <tradelab@xxxxxxxxxxx>
Subject: Re: GEN/MKT: What is this called?
References: <02420820106483@xxxxxxxxxxx>
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tl,
<P>This is straight out of the Monocle Help files. Not much in the
way of "calculations", but conceptually it's pretty good.
<P>Monocle, if you're not familiar with it, is devoted to the trading of
funds rather than stocks. The same principals should generally apply
I believe.
<P>Leo
<BR>
<HR WIDTH="100%">
<BR>Alpha
<P>The Alpha statistic is used to measure the risk-adjusted return of a
fund
<BR>relative to the Benchmark. Alpha is calculated by using a least-squares
<BR>regression of the fund's return against that of a Benchmark. For example,
<BR>let us assume that the return of the S&P 500 is 12% and the fund's
Beta
<BR>equals 1. Beta would predict the return of this fund to also equal
12%.
<BR>An Alpha of +2 indicates the fund has performed 2% better than its
Beta
<BR>would predict. Thus, its return would be 14%. In contrast, an Alpha
of -2
<BR>indicates the fund has performed 2% below its expected return, or a
10%
<BR>return. An Alpha of zero indicates performance in line with its Beta,
a
<BR>12% return. It is suggested by a number of professionals that the Alpha,
<BR>especially a shorter-term Alpha, is the most important predictor of
a
<BR>fund's potential future return.
<P>Beta
<P>The Beta statistic is a measure of a fund's sensitivity to an underlying
<BR>Benchmark. Beta is computed as the correlation of the Current Fund
with
<BR>the Benchmark times the ratio of the Current Fund's Standard Deviation
<BR>to the Benchmark's Standard Deviation.
<P>The Beta statistic is used as a measure of the fund's systematic or
market
<BR>risk. The Beta shows the sensitivity or variance of a fund's rate of
return
<BR>relative to a Benchmark. The market's Benchmark is normally defined
as
<BR>the Standard and Poor's 500 for equity funds. For example, if the market
<BR>Beta of a fund is 1.25, a fund is expected to perform 25% better in
up
<BR>markets and 25% less in down markets. Also, a fund with a 0.5 Beta
is
<BR>expected to perform 50% lower in up markets relative to the Benchmark,
<BR>but only half as poorly in down markets. Funds with high Betas are
<BR>commonly assumed to be riskier investments than funds with lower Betas.
<BR>
<HR WIDTH="100%">
<BR>TradeLab wrote:
<BLOCKQUOTE TYPE=CITE>Leo: I'd like a copy of the calculation.
If you post it to the group, I'll
<BR>just get it there.
<P>It's not clear to me if the alpha and beta measures are used consistently
<BR>the same way.
<P>My understanding of alpha is the performance of a security not due to
the
<BR>market movement. In other
<BR>words, you could detect stocks that move independently of the market
- low
<BR>correlation. Useful when trying to find up stocks in a down market.
<P>..tl
<P>At 02:45 PM 10/22/98 -0600, you wrote:
<BR>>Could it be that "Alpha" may be what you're looking for? It
is described in
<BR>>the Monocle II manual as a "statistic to measure the risk adjusted
return of
<BR>>a fund relative to the benchmark. Alpha is calculated by using a
<BR>>least-squares regression of the fund against that of the benchmark...."
As
<BR>>I understand it, Beta tells you how the fund (or stock) performs relative
to
<BR>>say the S&P 500, while the Alpha would tell you how much better
or worse the
<BR>>fund or stock performed relative to what the beta would predict..
<BR>>
<BR>>If you're interested, I'll scan the entire description of the calculation
<BR>>and e-mail it to you.
<BR>>
<BR>>Leo
<BR>>
<BR>>
<BR>>
<BR>>UG wrote:
<BR>>
<BR>>> Is there an indicator that measures movement with respect to the
market?
<BR>>> Not Beta; that's volatility. I'm looking for something that
would vary
<BR>>> in value from a negative number to a positive one; a value of 1
would
<BR>>> indicate the security rises in price when the market rises in price,
and
<BR>>> about the same amount. A value of -2 would indicate the security
drops
<BR>>> in price when the market rises (and vice versa), and about double
the
<BR>>> amount.
<BR>>>
<BR>>> Does such an indicator exist?
<BR>>>
<BR>>> --
<BR>>> ========================================================================
<BR>>> If God had meant us to be naked, we would have been born that way
<BR>>> http://www.unixgeek.com/cgi-bin/motd.pl
- PGP email preferred
<BR>>
<BR>>
<BR>>
<BR>></BLOCKQUOTE>
</HTML>
</x-html>From ???@??? Sun Oct 25 08:15:53 1998
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From: gordon@xxxxxxxxxxx (Guy Gordon)
To: metastock@xxxxxxxxxxxxx
Subject: Re: Weekly Pick
Date: Sun, 25 Oct 1998 03:38:58 GMT
Organization: White Crane Systems
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Wow, great minds really do think alike... Then there's me.
I sold my WMT Tuesday at 67.75, right after it hit the resistance line
we both see at 68.
I've been expecting stocks in general to fall all next week due to
mutual fund end-of-year selling. But this week the market was so
strong that I'm beginning to second-guess myself. Where did that
late-day friday rally in the DOW come from?
On Sat, 24 Oct 1998 14:40:33 -0400, you wrote:
> There is one stock that is beginning to look very interesting to me and that's the powerhouse retailer - Walmart (WMT). Walmart is getting close to a triple top and is giving every indication that it will break through. If it does break out and the DJIA also breaks out, WMT will be my first choice to replace any positions that I close.
> WMT at 68 is in a STUTC with the top at 76 and the bottom at 66. It set an all time high of just under 70 in mid July, pulled back to under 60 in early August then rose to just under 70 again in late August. From there it fell to a little above 50 in late September. It broke out of its Short Term Down trend Channel (STDTC) in early Oct and rose to just under 70 once again Monday. It fell back Tuesday, gathered strength again Wednesday and Thursday, then made a good up move Friday. The Tema Binary Wave Composite just turned positive and the QStick is negative, but rising from a negative peak. This sure looks like a setup for a triple top break out to me. The fundamentals on WMT are good. It has a price/sales of 1.2, a debt/equity of 0.51, almost 20% sales growth and almost 30% earnings growth. If I do establish a position, I'll set the target just under the top of the STUTC at 75 and the stop just under the bottom of the STUTC at 65 3/4.
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