Hey All,
So I don't know how much Ill be posting this week because I'm in the process of massively updating my software. I will soon have NYSE, Nasdaq, and Amex data which can completely download in about 10 minutes, real time data if necessarily, advanced statistics and fundamentals, and much faster computing abilities allowing me to back test theories in a fraction of the time
More to come!
Troy
Monday, April 18, 2011
Thursday, April 14, 2011
Book Review - How to Make Money in Stocks: A Winning System in Good Times and Bad
Today I thought I'd do something different for my post and write a review on the first investing book I ever read. How to Make Money in Stocks by William O'Neal isn't a true quantitative investing (QI) book but instead covers some of the fundamentals that QI was founded on.
The whole book is based around the CAN SLIM parameters for assessing a stock. Many of these are fundamental analyses that don't really apply to this blog. What does apply however is the timing and chart recognition sections, of which there are a lot. He covers how volume should positively correlate with stock price for there to be increases in price, and he introduces his 'cup with handle' pattern as the chart pattern that all great gainers demonstrated. He also discusses other patterns: cups without handles, flags, double bottoms... all of which are rooted in technical analysis. The first section of the book really is the coolest. It's a collection of charts from the best stock over the past century. One thing you'll realize is that market action really hasn't changed nearly as much as you'd think over this time.
The writing is also very straight forward and concise. You don't need a glossary by your side to read the book, nor follow CNBC on a daily basis. The most recent edition was also written post-recession and offers some interesting insight into the whole thing. Sometimes I find it funny to read books written just before the crash...and see how oblivious some of those writers really were...but not with this one.
I really think this is a fantastic book, for both novices and experienced investors. It taught me a lot about how people think about the market (which is a very important thing to always consider). If you do nothing else with the book, stare at the charts of all the great gainers, look for patterns beyond what he talks about, and learn about what matters to the majority of investors.
The whole book is based around the CAN SLIM parameters for assessing a stock. Many of these are fundamental analyses that don't really apply to this blog. What does apply however is the timing and chart recognition sections, of which there are a lot. He covers how volume should positively correlate with stock price for there to be increases in price, and he introduces his 'cup with handle' pattern as the chart pattern that all great gainers demonstrated. He also discusses other patterns: cups without handles, flags, double bottoms... all of which are rooted in technical analysis. The first section of the book really is the coolest. It's a collection of charts from the best stock over the past century. One thing you'll realize is that market action really hasn't changed nearly as much as you'd think over this time.
The writing is also very straight forward and concise. You don't need a glossary by your side to read the book, nor follow CNBC on a daily basis. The most recent edition was also written post-recession and offers some interesting insight into the whole thing. Sometimes I find it funny to read books written just before the crash...and see how oblivious some of those writers really were...but not with this one.
I really think this is a fantastic book, for both novices and experienced investors. It taught me a lot about how people think about the market (which is a very important thing to always consider). If you do nothing else with the book, stare at the charts of all the great gainers, look for patterns beyond what he talks about, and learn about what matters to the majority of investors.
Monday, April 11, 2011
10 High Momentum Stocks
In my daily update of the Bat Computer Market Analyzer I give you the momentum of the current Nasdaq market. Momentum measures how much up or down a stock is going on a certain volume. A highly positive volume means a stock price is rising on high volume while a highly negative momentum means a stock price is falling on high volume. See here for the equation...
http://thequantinvestor.blogspot.com/2011/03/bat-computer-market-analysis-software.html
I though I'd take that measure and apply it to find the top ten stocks with the highest momentum. The first time I ran this however, I ended up with a whole bunch of stocks that gapped up on high volumes (i.e. from a buyout offer). So I added one caveat, I'd limit it to stocks that haven't gapped up > 1% in the past 10 days (the same period I calculate the volume over). So here it is...the top ten momentum stocks
VDSI
KEYN
KSWS
ABMD
PPDI
PDLI
AFFX
STKL
SQNM
STEI
...next week we'll check back and see how they do.
http://thequantinvestor.blogspot.com/2011/03/bat-computer-market-analysis-software.html
I though I'd take that measure and apply it to find the top ten stocks with the highest momentum. The first time I ran this however, I ended up with a whole bunch of stocks that gapped up on high volumes (i.e. from a buyout offer). So I added one caveat, I'd limit it to stocks that haven't gapped up > 1% in the past 10 days (the same period I calculate the volume over). So here it is...the top ten momentum stocks
VDSI
KEYN
KSWS
ABMD
PPDI
PDLI
AFFX
STKL
SQNM
STEI
...next week we'll check back and see how they do.
Friday, April 8, 2011
Spotty posting
Hi all,
Sorry if my posting is spotty in the next week or so. I'm headed down to Army Research Lab to do some contract work for a while and will be busy moving down/settling in.
Troy
Sorry if my posting is spotty in the next week or so. I'm headed down to Army Research Lab to do some contract work for a while and will be busy moving down/settling in.
Troy
Monday, April 4, 2011
The Best Hedges
If you've come to this post hoping for a lawn trimming pictorial then I'm sorry if I mislead you.
Often when building a portfolio, investors look to 'hedge' their investments. Wikipedia defines a hedge (finance) as, '...a position established in one market in an attempt to offset exposure to price changes or fluctuations in some opposite position with the goal of minimizing one's exposure to unwanted risk.' The tools of quantitative analysis give us a powerful and simple way to quantify the effective of a hedge. The correlation between the price movements of two stocks tells us how similar the changes in price are. I've already covered the basics of correlations in a previous post, so I won't do it again here. The idea is though, that if we want the stocks to be ideal hedges of each other, we want their price movements to be anti-correlated (correlation coefficient = -1). In short, if the price of one goes up one day the other should go down, and vise versa.
So today I'll provide you with the top 3 quantitative hedges (Nasdaq only) of some of the most widely held equities in three sectors. Then I'll do something interesting and try to see if these hedges make sense, or if they're some kind of funny coincidence.
_________________________________________________________________________
First up are the 3 best hedges against Google (GOOG),
Symbol Correlation
SCIL -0.8347 - Educational software
ALXA -0.8158 - Pharmaceutical company
SXCI -0.7897 - Pharmaceutical and healthcare IT
_________________________________________________________________________
So here's the thing...I see no rhyme or reason for any of these ideal hedges. Perhaps they are merely coincidental hedges or outliers of statistical randomness. Or perhaps they reflect some underlying trading activity. What I hope you get from this post is an understanding that a diversified portfolio can come from non-traditional combinations of equities. Perhaps Jim Cramer is a bit too presumptions in his, 'Are you diversified?' part of the show. Either way, once again, an (anti)correlation analysis is a powerful mathematic tool that you can add to your stock market toolkit.
----
*There are more complicated ways to compute hedges and I will build on those in a later post. Namely, we don't simply want our portfolio to balance itself out and never profit, but we want to minimize fluctuation/risk while maximizing return (see: Sharpe Ratio). Stay tuned...
Often when building a portfolio, investors look to 'hedge' their investments. Wikipedia defines a hedge (finance) as, '...a position established in one market in an attempt to offset exposure to price changes or fluctuations in some opposite position with the goal of minimizing one's exposure to unwanted risk.' The tools of quantitative analysis give us a powerful and simple way to quantify the effective of a hedge. The correlation between the price movements of two stocks tells us how similar the changes in price are. I've already covered the basics of correlations in a previous post, so I won't do it again here. The idea is though, that if we want the stocks to be ideal hedges of each other, we want their price movements to be anti-correlated (correlation coefficient = -1). In short, if the price of one goes up one day the other should go down, and vise versa.
So today I'll provide you with the top 3 quantitative hedges (Nasdaq only) of some of the most widely held equities in three sectors. Then I'll do something interesting and try to see if these hedges make sense, or if they're some kind of funny coincidence.
_________________________________________________________________________
First up are the 3 best hedges against Google (GOOG),
Symbol Correlation
SCIL -0.8347 - Educational software
ALXA -0.8158 - Pharmaceutical company
SXCI -0.7897 - Pharmaceutical and healthcare IT
_________________________________________________________________________
Next up are the 3 best hedges against Qualcomm (QCOM),
Symbol Correlation
THOR -0.8936 - Medical device electronics
THOR -0.8936 - Medical device electronics
AMAG -0.8336 - Pharmaceutical company
STRA -0.7967 - Post secondary education services
_________________________________________________________________________
_________________________________________________________________________
Finally are the 3 best hedges against Amgen (AMGN),
Symbol Correlation
CRUS -0.4881 - Electronics
WINA -0.4842 - Value retail
VASC -0.4058 - Medical Devices
So here's the thing...I see no rhyme or reason for any of these ideal hedges. Perhaps they are merely coincidental hedges or outliers of statistical randomness. Or perhaps they reflect some underlying trading activity. What I hope you get from this post is an understanding that a diversified portfolio can come from non-traditional combinations of equities. Perhaps Jim Cramer is a bit too presumptions in his, 'Are you diversified?' part of the show. Either way, once again, an (anti)correlation analysis is a powerful mathematic tool that you can add to your stock market toolkit.
----
*There are more complicated ways to compute hedges and I will build on those in a later post. Namely, we don't simply want our portfolio to balance itself out and never profit, but we want to minimize fluctuation/risk while maximizing return (see: Sharpe Ratio). Stay tuned...
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