First step in risk mitigation is to know the risk. Even good stocks like Nvidia lost 278 bn USD in a day. We need to be aware about the risk involved. I mean actual value your portfolio can go down!
Rather than walking in the dark assuming whatever happens to others happens to my portfolio is a loser’s game. Being prepared and planning for failure is the right step!
Diversity and portfolio balancing reduces risk to a great extent.
Risk measurement should be stock agnostic, I should not assume I have this scrip, it is damn safe. If we do the analysis of Historical scrips on NSE
10% of Large caps have lost 95% of their value, 40% of mid cap, about 50% of small cap’s.
We have created a Var + Stress test tool that uses probability model + simulation to measure how individual portfolio loses value.
Var is Value at risk-This is the general value of your portfolio at risk when market correction happens. Stress test is the value at risk when systemic events due to some big scam, or big financial or geopolitical event happens.
Var is computed like this: Assume for specific category like large cap if user has 6 scrips, we compute at 10% probability how many of these scrips will be black sheep. These scrips will attain bottom 5% of value in 3 months simulation period. Remaining scrips will undergo 1 standard deviation correction.
For stress test- these scrips will attain bottom 1% of its value. We have taken combined volatility and expected value for simulation.
The report contains absolute loss in % if the event happens and if long term downtrend continues %cagr (how much fall your portfolio has in 1 year compounded rate). Any cagr calculator can compute final value of your portfolio by entering %cagr value provided in report and time duration in years
Use https://www.AntsAnalyzer.com and give your feedback!
The tool can do both portfolio balancing and carry out Var/Stress test and gives star rating for your portfolio. Any portfolio with 4* or more has good diversity.
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