Analytic Services for Capital Managers, CFPs,
Market Analyst and RIAs
The V-Report relates clearly and concisely the complexities of the market so you can better understand and provide client presentations with confidence. Risk and opportunity analysis are based on state of the art Technical Event Modeling.
A 2016 CMT white paper cast light on a neglected study
The premise of FORECASTING A VOLATILITY TSUNAMI was the anecdotal belief among the professional and non-professional investment community, that a “low” reading in the CBOE Volatility Index (VIX) or a large decline in Implied volatility alone is ample reasons to believe that volatility will spike in the near future. Well it is valid casual observation of the raw numbers but the paper left much-unfinished work, and that is where our work began in 2012.
Volatility, the statistic, is indifferent to a direction
Simply put volatility measurement is “direction neutral” which is something the old school does not understand, yet. Of course, when V spikes it is normally associated with a stock market decline because stocks fall faster than they advance. Even if the trend-direct call is true 75% of the time, don’t we want better risk and opportunity management compared to “trend following?” Look at the panic buying after the 2016 election, with the FOMO right into the January 2018 peak.
Old School Risk Management…
The old school puts direction first. Because 70%-80% of the direction of a stock is due to the market’s direction, hence many analysts want to determine the market’s direction before anything else. They do this with some nouveau sounding quant risk model incorporating breadth, momentum & dollar flow metrics.
The problem remains, it does not address the size of the opportunity, the amount of risk, or a preferred strategy, all of which can be determined without surmising the direction of the trend.
Context is everything, the prime indicator of opportunity and risk
An axiom is the starting point of reasoning. It is a premise so evident it has to be accepted as true without controversy. First principle thinking is what Elon Musk believes is the basis of his success. Words have a definition but they have no meaning unless you put them into context, the same applies to risk management.
New formulas for isolating alpha
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