Up and down – portfolio volatility


The theme today is volatility. The reason is a discussion I had. The other day, I discussed shares with a friend and we compared list on our phones. On mine, BrainCool was up 4-5 %, AroCell down 6 % etc. Then he showed his list with large cap shares and the changes were 0.57 % and occasional 1.42 %. A change of 3 % is to him extraordinary while in my portfolio 3 % might be the difference from one trade to the next. Just reflecting the spread.

The portfolio is highly volatile

Normally in share literature, we speak of alpha and beta when speaking of volatility. The beta values is a measure if the individual shares are more or less volatile than the general market. I will not go into calculating standard deviations, but try to illustrate volatility in a more simple fashion.

Above is a table, based on the shares in my portfolio. I have made a simple calculation of the difference in percent between the highest and the lowest spare price. I have done so for both September (green) and the past week, week 39 (blue). On top of the table, I have as reference placed the broad Stockholm Index (SPI). The focus columns are the first column in each colour zone, the one in bold named ‘Vola’. ‘Vola’ is the difference in percent between highest and lowest share price on basis of the lowest price.

During September, SPI have moved 6 % between the highest and the lowest point. It is clear to see that the volatility of all the individual shares in the portfolio are much higher. The distance between the top price and the lowest price is far greater. For BrainCool the difference is 76.9 % and for CybAero it is 45.8 %. The share with the lowest volatility is Nexam with 8.5 %

Volatility equals risk

This way of calculating the volatility does have one disadvantage. It does not tell if the share follows the market. During both periods (September and week 39) SPI have moved upwards. You can see in the table that the share price on Friday (‘29-sep’ column) equals the ‘high’ price in both green and blue. The same goes for BrainCool, which tells us that the share has moved the same direction as the market and by far has outperformed it. Then look at CybAero in the next line. The share price have gone down from above 10 SEK (‘high’ column) to a level just above 7 SEK (7.4 SEK on Friday and 7.2 in ‘Low’). CybAero have performed far below market. A high volatility is therefore not a measure of up or down. It is a measure of risk.

I have marked the three best performing shares in green (BrainCool, Fortnox and Cantargia), and the three worst in red (CybAero, Dignitana and Nexam).

This brings me back to the comparison on the phones the other day. It was evident that what we saw besides two different portfolios was two very different approaches to risk. This portfolio is high risk and you have to be able to sleep with that. Last night I had a good night’s sleep even though the (formerly) largest share in the portfolio, Dignitana, plunged 14.6 % yesterday. He probably wouldn’t have slept at all.

Find the reason for Dignitanas plundge here

Check out my growth share portfolio, the share price trigger list or my EGS (Evaluation of Growth Shares) Model.

1 thought on “Up and down – portfolio volatility

  1. Pingback: New share in the portfolio – Waystream | Swedish growth shares

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.