Markets
38,040.57
15.12 (0.04%)

Shashikant Singh

Mutual Fund Unlocked: Ulcer Index, another way of measuring investment risk

A lot of bytes and reams of paper have been used to explain the risk in mutual fund investment and various ways of assessing and evaluating them. The most popular being the standard deviation. Although, it is widely used, there are certain drawbacks of this measure of risk that may not entirely capture the pain of an investor. For example, as an investor, you are not worried much if your investment is continuously moving up. Standard deviation does not differentiate between upside and downside movement and treats both in a similar fashion. Moreover, it fails to capture series of losses that result in substantial fall in the investment value.

Ulcer Index developed by Peter G. Martin correctly captures the investor’s pain, which contains more information compared to standard deviation. Ulcer Index addresses the real concerns of investors and measures both the percentage of downfall and for what time such fall sustained from earlier highs.

Ulcer index is calculated as follows for ‘xx’ period.

Percentage Drawdown = [(Close – ‘xx’ period High Close)/’xx’- period High Close] x 100

Squared Average = (‘xx’-period Sum of Percentage Drawdown Squared)/’xx’

Ulcer Index = Square Root of Squared Average

The following graph and explanation picked from his book correctly explain why standard deviation might not be the right metric to calculate risk and investor’s pain.

• The three hypothetical investments in the chart above have the same annualized return (-0.52%/year) and the same SD (4.66%/month), but no rational investor would consider them as having the same risk.

The longer the period, the better you can judge the performance of the investment. Daily and weekly NAVs will give you a better picture of investor’s stress.

The way to interpret ulcer index is lower the better and hence if a fund has Ulcer index of zero, the investment would have never lost money. This index should be used to evaluate the performance of different funds in terms of protecting the downside risk. Therefore, if you are a risk aversive investor you should check this index for different funds that you are contemplating to invest in.

Print
5.0

IPO Market

Company Name Listing
Date
Listing
Price
Date
Price
Volume
(Nos)
NDR Auto Components Ltd. 30/07/2020 150.05 07/08/2020 120.35 2,226
Rossari Biotech Ltd. 23/07/2020 670.00 07/08/2020 753.65 744,142
Borosil Ltd. 22/07/2020 208.00 07/08/2020 161.15 89,181
Aarti Surfactants Ltd. 14/07/2020 505.00 07/08/2020 284.00 2,059
ABB Power Products and Systems India Ltd. 30/03/2020 714.00 07/08/2020 881.30 92,145

SME Market

Company Name Issue Open
Date
Isuue Closing
Date
Issue
Price
BID
FROM
BID
TO
List
Date
List
Price
Last
Price
SM Auto Stamping Ltd. 2020-03-03 2020-03-05 18 0.00 0 2020-03-16 18 16
RO Jewels Ltd. 2020-03-12 2020-03-17 36 0.00 0 2020-03-25 0 36
Cospower Engineering Ltd. 2020-03-17 2020-03-19 51 0.00 0 2020-03-27 0 60
Cospower Engineering Ltd. 2020-03-17 2020-03-19 56 0.00 0 2020-03-27 0 60
DJ Mediaprint & Logistics Ltd. 2020-03-26 2020-03-31 20 0.00 0 2020-04-13 21 35

Q1FY21 results: Abbott India profit jumps by 54.22 per cent YoY to Rs 180.35 crore

chinmayee d / Article rating: 4.7

The consolidated net sales reported in Q1FY21 came in at Rs 1,064.27 crore, which increased by 6.55 per cent YoY from Rs 998.89 crore in Q1FY20.

Q1FY21 results; Bata India net loss of Rs 100.89 crore

chinmayee d / Article rating: 3.2

The consolidated net sales reported in Q1FY21 came in at Rs 135.08 crore, which declined by 84.7 per cent YoY from Rs 882.76 crore in Q1FY20.

Caplin Point Laboratories forms bearish engulfing candle

Vinayak Gangule / Article rating: 3.7

The stock of Caplin Point Laboratories Limited formed a bearish engulfing candlestick pattern on the daily timeframe. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Berger Paints India gives trendline breakout

Vinayak Gangule / Article rating: 2.8

The stock of Berger Paints India Limited has given a downward sloping trendline breakout, formed by connecting swing highs from February 2020. The breakout was supported by robust volumes.

Tube Investments gains post acquiring controlling interest in CG Power

Pratik Shastri / Article rating: 3.3

Both the companies, which are in the same sector that is engineering, are expected to be beneficial to all. Tube Investment believes that its operations as well as financial efficiency could help in the resolution of issues going on in CG Power.