What is a RiskGrade? [ top ]
A RiskGrade is a measure of price
volatility (or return volatility) that helps investors
better understand their market risk. RiskGrades can
range from 0 to 1,000 or more, where 100
corresponds to the market-cap-weighted average
volatility of global equity markets during normal
market conditions from 1995 to 1999. The SSR
system makes use of the one-year average
RiskGrade, which eliminates the bias that short-term
fluctuations can cause in the current RiskGrade
figure.
The RiskGrade statistic is a standardized measure
of volatility and, therefore, allows for a direct apples-
to-apples comparison of investment risk across all
asset classes and regions. For example, we can say
that a stock with a RiskGrade of 300 is six times as
risky as a bond fund with a RiskGrade of 50.
Furthermore, RiskGrades captures all components
of market risk: equity, interest rate, currency, and
commodity risk. A RiskGrade is a consistent, robust,
dynamic, and global risk measure that operates
differently from traditional risk measures—such as
beta, standard deviation, and average shortfall.
RiskGrades are indicators of risk based on the
volatility of returns. Volatility is a universal risk
measure applicable to all asset classes. The higher
the volatility of returns, the higher an asset’s
RiskGrade.
A RiskGrade of 0 indicates that a financial asset
effectively has no price volatility. A RiskGrade of
1,000 indicates that a financial asset is 10 times as
volatile as an asset or index with a RiskGrade of
100. The RiskGrade of an asset increases in direct
proportion to its price volatility, and one can
compare the RiskGrades of different assets by
assuming a linear relationship.
Click [ here ] for more information on the RiskGrade measure.
How is relative strength calculated? [ top ]
The calculation looks at the price movement after the highest closing price the stock achieved since being added to the SSR portfolio relative to the movement of the DJ Wilshire 5000 since the close of the day on which the stock reached its high.
The calculation for the relative strength value is as follows:
Current Stock Price ÷ Highest closing price of stock since its purchase for SSR portfolio
Current DJ Wilshire 5000 ÷ DJ Wilshire 5000 close on the date of the highest stock close since its purchase for SSR portfolio
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What is the DJ Wilshire 5000? [ top ]
The DJ Wilshire 5000 total market index
represents the broadest index for the U.S. equity
market, measuring the performance of all U.S.-headquartered equity securities with readily available
price data. The index was originally named after the
nearly 5,000 stocks it contained when it was first
created, but it has grown to include over 6,500 issues
(reflecting the growth in U.S. equity issues as a
whole).
