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Quant Structure Recap of the Market (September ’17): Performance of 3 Long Stocks & 2 Short Stocks

Quant Structure Recap of the Market (September ’17): Performance of 3 Long Stocks & 2 Short Stocks
Education Series | October 14, 2017

In the month of September’17, Quant recommended Stocks like TV Today, KNR Cons and DB Corp went up by 14.8% average, while shares to sell Welspun India and Idea fell by 13.3%.


Recap of September 2017: Nifty fell by 0.97% during the month of September, while Nifty 500 fell by 0.73% and Nifty Mid Cap and Nifty Small Cap fell by 0.57% and 2.12% respectively

On the other hand, in terms of sector, materials, consumer discretionary, healthcare, and utilities grew by 0.26%, 2.10%, 1.52%, and 0.46% respectively; while energy, industrial, consumer staples, financials, information technology and telecom fell by -1.27%, -1.01%,-2.55%,-1.82%,-0.86% and -5.46% respectively.

In terms of trend, Earning Score was a better predictor of price movements in September. Stocks with Price Score (PS) above 70 (at the end of August) and stocks with Price Score (PS) below 30 (at the end of August) witnessed a median fall of 0.21% and 0.86%. Stocks with Earning Score (ES) above 70 (at the end of August) rose by a median of 0.21% whereas stocks with Earning Score (ES) below 30 (at the end of July) fell by a median of 0.74%.

3 Long Stocks

If any stock with high Earning Score (preferable above 75) trades with poor Price Score (below 50) for any period of (say a month) positive price momentum then it usually signals revival in that stock price.  For the month of August 2017, Nifty was down by 1.6% so, the appropriate price momentum level for July was more than 0%. Also, one should avoid stocks that have a very high momentum (as the firework might be over in those stocks). If for July, the level was set to 3% i.e. all stocks with returns were between 0% and 3% during August then it could be called the right price momentum. So the 3 appropriate shares to go long for September were:


And the returns those 3 stocks gave in September were:


 

2 Short Stocks

If any stock with low Earning Score (preferably below 30) trades with high Price Score (above 55) for any period (say a month) of negative price momentum, then it usually signals topping out of that stock price.  For the month of August 2017, Nifty was down by 1.57% so, the appropriate negative price momentum level for July was less than -1.5%. Also, one should avoid stocks that already have a negative momentum (as the firework might be over in those stocks). For August, if the level fell to -5% i.e. all stocks with returns were between -1.5% and -5% then it could be called negative price momentum. Hence, the 3 appropriate shares to go short for September were:


The percentage by which those 2 stocks dropped in September was:


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ABOUT THE BLOGGER
Atul MishraAdvanced Market Researcheratul.mishra@narnolia.com

Atul works with an Advanced Market Research Group at Narnolia Research. His forte is quantitative research on Indian equities. He is a computer science graduate with Masters in Finance from Faculty of Management Studies, Banaras Hindu University.

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