Tuesday, 25 November 2014 - 20:00
Charts
Seed weekly - The risk is to the Downside
A previous article looked at why capital protection is an important factor when choosing a fund manager. Today we distinguish between good and bad volatility. In short, the volatility of the fund indicates how predictable the returns are. When a fund’s volatility is low, the monthly returns are very close to the average return over the period you are looking at (i.e. relatively predictable). The volatility of the fund is typically measured by standard deviation, how the much the monthly returns deviate from the average return. A money market fund will normally have low volatility. The opposite is true for equity funds whose volatility tends to be high, and the return predictability very low, in the short term.
The graph below shows the monthly returns of a money market fund compared to that of an equity fund over the past 5 years.
The graph above shows how stable money market returns are compared to an equity fund. The graph below shows the standard deviation of the funds.
But not all volatility is bad. Standard deviation takes into account up and downside volatility, but as investor you should be more concerned with downside volatility or loss standard deviation.
The graph below shows the monthly return distribution of 3 equity funds over the past 5 years.
Let’s first look at some statistics of the funds
Fund 1’s returns are the most concentrated compared to the other two funds. The fund does have a few months that are on the edges, but most months were between -2% and 2%. The fund also had the least number of negative months.
The returns for Fund 2 are slightly more spread out than Fund 1, but Fund 2’s returns are much more uniformly spread between -3% and 5%. The returns aren’t as concentrated as Fund 1. Fund 2 also has the highest average monthly return.
Fund 3 is the most spread out and also has the most negative months. The fund also had the lowest month return (-10.1%).
The graphs below plot the standard deviation (left) and loss standard deviation (right)
Because Fund 1’s returns are much more concentrated around the average return, its standard deviation is lower than the other two funds. Fund 2 and Funds 3 returns are almost equally spread out from the average monthly returns. That is why their standard deviation is similar, despite Fund 2 having more positive months than Fund 3.
This is why it is better to look at the loss standard deviation instead of only the normal standard deviation. On the right had side we can see that Fund 1 and Fund 2 loss standard deviation is very similar. The additional volatility of Fund 2, compared to Fund 1, is due to spread out of its positive months.
On the normal standard deviation and loss standard deviation, Fund 3 comes off the worst. The returns for the fund are most unpredictable and the chances of having a negative month are the highest.
Based solely on the quantitative information above we will tend to make use of Fund 2 in our solutions. While the fund’s returns may be more volatile than the other two funds, the volatility is mostly on the positive side. Naturally, in reality our process looks more in depth at both the quants and large emphasis is placed on the qualitative research before making use of any fund in our solutions.
Kind regards,
Gerbrandt Kruger
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 25 Nov 2014
Top News
South Africa's rand firmed against the dollar on Tuesday after the latest GDP data showed the strongest quarterly growth since late last year, while a local survey pointed to an improvement in business confidence. Full story
South African stocks ended lower on Tuesday, dragged down by mining shares as metal prices fell, but Steinhoff jumped after the furniture firm unveiled a $5.7 billion deal to enter the apparel market. Full story |
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The St. Louis area braced for another day of protests on Tuesday after a grand jury cleared a white police officer in the fatal August shooting of an unarmed black teenager, sparking a night of violent and racially charged rioting. Full storyGunshots were heard and bottles were thrown as anger rippled through a crowd outside the Ferguson Police Department in suburban St. Louis after authorities on Monday announced that a grand jury voted not to indict a white officer in the August shooting death of an unarmed black teen. Full storyScuffles erupted after Hong Kong authorities cleared part of a pro-democracy protest camp in the bustling district of Mong Kok on Tuesday following a court order to reopen a road, with several demonstrators taken away in police vans. Full story |
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Markets | A surprising upward revision in
U.S. third-quarter economic growth set off an early rally on
Wall Street on Tuesday only to see prices. . . Full story | | Gold edged up to around $1,200 an
ounce on Tuesday after better-than-expected U.S. economic growth
data boosted the dollar only briefly and as. . . Full story | | Hong Kong shares inched down on Tuesday
as investors turned cautious and consolidated positions after
gains spurred by China's surprise lending-rate cut.. . . Full story | | The Osaka Exchange started trading
of the JPX-Nikkei Index 400 futures on Tuesday amid increasing
interest from foreign investors seeking long-term investment in
companies. . . Full story |
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| China stocks closed up on
Tuesday as domestic markets continued to rally after the central
bank lowered a key short-term money rate, seen. . . Full story | | Japan Exchange Group Inc (JPX)
has decided not to introduce extended trading hours on
the Tokyo Stock Exchange for now, Atsushi Saito,. . . Full story | | Australian shares fell
0.8 percent on Tuesday, nearly wiping out all of their
China-inspired gains in the previous session, as falling
commodity prices hit. . . Full story | | Gold was slightly lower on Monday
as buying that propelled bullion to three-week highs on Friday
ran out of steam after a surprise. . . Full story |
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SA Business | South Africa's power utility Eskom said on Tuesday it needs a substantial injection of funds to ease a cash crunch and. . . Full story | | South Africa's quarterly business confidence index rose further in the fourth quarter of 2014, climbing back into positive territory for the. . . Full story | | South Africa's GDP grew by an annualised 1.4 percent quarter-on-quarter in the third quarter of 2014, from a revised 0.5 percent. . . Full story | | U.S. private equity firm Carlyle Group LP has agreed to acquire a stake in South African tyre dealer Tiger Wheel &. . . Full story |
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| Africa's largest telecoms operator, MTN, put a positive gloss on Tuesday's devaluation of the naira, saying the weaker Nigerian currency would. . . Full story | | South Africa's Steinhoff International will buy clothing retailer Pepkor in a $5.7 billion deal that gives the budget furniture firm exposure. . . Full story | | The global economy will gradually
improve over the next two years but Japan will grow less than
previously expected while the euro zone. . . Full story | | U.S. private equity firm
Carlyle Group LP has agreed to acquire a stake in South
African tyre dealer Tiger Wheel & Tyre, according. . . Full story |
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| Naspers, Africa's largest company by market value, on Tuesday reported a 22 percent increase in first-half earnings, helped by a strong contribution from Hong Kong-based Internet business Tencent.. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 50507.59 | -219.63 | -0.43% | JSE Top 40 | 17:00 | 44909.52 | -173.25 | -0.38% | JSE Gold | 17:00 | 1117.58 | 4.09 | 0.37% | JSE Financial | 17:00 | 40545.44 | -286.13 | -0.70% | JSE Industrial | 17:00 | 70106.67 | -67.77 | -0.10% | JSE Indust 25 | 17:00 | 61994.65 | 14.45 | 0.02% | JSE Resource | 17:00 | 46571.56 | -492.56 | -1.05% | DJ Futures | 19:48 | 17805.00 | 12.00 | 0.07% | DJ Ind | 19:58 | 17842.67 | 24.77 | 0.14% | SP 500 | 19:58 | 2070.54 | 1.13 | 0.05% | Nasdaq | 19:58 | 4758.41 | 3.52 | 0.07% | FTSE 100 | 18:35 | 6731.14 | 1.35 | 0.02% | DAX | 19:08 | 9861.21 | 75.67 | 0.77% | CAC40 | 19:08 | 4382.31 | 13.87 | 0.32% | Nikkei | 08:28 | 17407.62 | 50.11 | 0.29% | Shanghai | 09:28 | 2567.60 | 34.72 | 1.37% | Hang-Seng | 06:28 | 23862.91 | -13.06 | -0.05% | All Ords | 07:44 | 5320.90 | -28.10 | -0.53% | NZSE 50 | 06:48 | 5442.68 | -29.00 | -0.53% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1196.27 | -2.23 | -0.19% | Gold R | 19:58 | 13093.70 | -104.72 | -0.79% | Gold R/kg | 19:58 | 420914 | -3117 | -0.74% | Silver $ | 19:59 | 16.5360 | .0600 | 0.36% | Platinum $ | 19:59 | 1220.90 | 21.70 | 1.81% | Palladium $ | 19:59 | 794.90 | 4.95 | 0.63% | R157 | 22/09 | 6.99 | -.02 | 0.00% | R186 | 17:36 | 7.78 | .04 | 0.52% | R204 | 17:35 | 6.86 | .05 | 0.73% | R207 | 17:35 | 7.08 | .03 | 0.43% | Brent Crude | 19:58 | 78.55 | -1.81 | -2.25% | Rand / Dollar | 19:59 | 10.9457 | -0.0647 | -0.59% | Rand / Pound | 19:55 | 17.1595 | -0.1062 | -0.62% | Rand / Euro | 19:55 | 13.6393 | -0.0662 | -0.48% | Rand / NZD | 19:58 | 8.5428 | -0.1184 | -1.37% | Rand / AUD | 19:55 | 9.3298 | -0.1649 | -1.74% | Yen / Dollar | 19:59 | 117.9290 | -0.3900 | -0.33% | Euro / Dollar | 19:59 | 0.8025 | -0.0015 | -0.19% | Dollar / Euro | 19:59 | 1.2459 | 0.0021 | 0.17% | Pound / Dollar | 19:55 | 0.6363 | -0.0002 | -0.03% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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25/11/2014 | 144 | 226 | 50 | 420 | 314,041,689 | R21,675,652,416 | 345720 | 1475561 | 24/11/2014 | 169 | 188 | 61 | 418 | 232,622,331 | R17,088,270,320 | 236540 | 1340649 | 21/11/2014 | 271 | 85 | 51 | 407 | 290,840,680 | R18,977,913,936 | 296771 | 615621 | 20/11/2014 | 92 | 259 | 56 | 407 | 258,545,499 | R17,309,665,743 | 259006 | 1553696 | 19/11/2014 | 181 | 163 | 68 | 412 | 213,057,108 | R14,659,383,190 | 203838 | 425358 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 44,909.52 | -173.25 | -0.38% | Industrial | 70,106.67 | -67.77 | -0.10% | Mid Cap | 68,344.24 | -579.36 | -0.84% | Small Cap | 57,708.35 | 47.52 | 0.08% | Resource 20 | 46,571.56 | -492.56 | -1.05% | Industrial 25 | 61,994.65 | 14.45 | 0.02% | Financial 15 | 15,605.51 | -75.86 | -0.48% | Financial & Ind. 30 | 66,208.69 | -90.99 | -0.14% | All Share | 50,507.59 | -219.63 | -0.43% | Oil & Gas | 39,305.37 | -386.69 | -0.97% | Mining | 27,134.81 | -298.94 | -1.09% | Gold Mining | 1,117.58 | 4.09 | 0.37% | Platinum Mining | 36.71 | -.30 | -0.81% | GENERAL MINING | 7,997.48 | -107.13 | -1.32% | Oil & Gas Producers | 21,133.77 | -207.92 | -0.97% | Basic Materials | 24,502.30 | -306.85 | -1.24% | Chemicals | 23,640.72 | -1656.92 | -6.55% | Forestry & Paper | 32,167.33 | -472.62 | -1.45% | Industrial Metals | 15,127.22 | 6.01 | 0.04% | Industrials | 47,411.06 | -289.14 | -0.61% | General Industrials | 161.01 | -.76 | -0.47% | Consumer Goods | 62,413.29 | 560.30 | 0.91% | Automobiles & Parts | 8,129.41 | -90.57 | -1.10% | Household Goods | 401.40 | 17 | 4.50% | Health Care | 10,300.60 | -24.47 | -0.24% | Beverages | 207.28 | 1.54 | 0.75% |
| | Index Name | RP | Move | % Move | Food Producers | 9,375.40 | -54.98 | -0.58% | Personal Goods | 1,002.56 | 9.59 | 0.97% | Consumer Services | 13,956.57 | -137.59 | -0.98% | General Retailers | 73,589.37 | -244.50 | -0.33% | Travel & Leisure | 6,234.73 | -2.25 | -0.04% | Media | 324.49 | -5.34 | -1.62% | Support Services | 2,928.85 | 61.27 | 2.14% | Telecommunications | 10,924.25 | -34.16 | -0.31% | Financials | 40,545.44 | -286.13 | -0.70% | Banks | 71,226.40 | -339.35 | -0.47% | Non-life Insurance | 55,127.97 | 219.49 | 0.40% | Life Insurance | 38,122.30 | -333.63 | -0.87% | General Financial | 3,949.96 | -108.44 | -2.67% | Technology | 48,345.99 | -906.38 | -1.84% | SHARIAH TOP40 | 3,738.95 | -22 | -0.57% | FTSE/JSE SHARIAH ALL | 3,961.15 | -22 | -0.56% | COAL MINING | 14,307.94 | 163 | 1.15% | FTSE JSE Fledgling | 6,542.49 | -4 | -0.07% | FTSE/JSE Alt X | 1,379.78 | -7 | -0.48% | SA LISTED PROPERTY | 580.44 | | 0.05% | CAPPED PROPERTY | 501.94 | | 0.21% | RESOURCE | 25,339.06 | -273 | -1.07% | DIVIDEND PLUS | 232.33 | -0 | -0.15% | FTSE/JSE RAFI 40 | 9,679.73 | -44 | -0.45% | Capped Top 40 | 23,931.75 | -88 | -0.37% | Capped All Share | 25,609.63 | -110 | -0.43% | JSE TABACO | 8,171.30 | -17 | -0.21% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | NHM | NORTHAM PLATINUM LIMITED | BUY | 24/11/2014 | CML | CORONATION FUND MANAGERS ... | HOLD | 24/11/2014 | LBH | LIBERTY HOLDINGS LTD ORD | HOLD | 24/11/2014 | TBS | TIGER BRANDS LTD | HOLD | 21/11/2014 | VOD | VODACOM GROUP LIMITED | HOLD | 21/11/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 26/11/2014 | ANGLD | September 2014 (Q) | 26/11/2014 | ANGLD-A | September 2014 (Q) | 26/11/2014 | ANGLD-B | September 2014 (Q) | 26/11/2014 | ANGLD-E | September 2014 (Q) | 26/11/2014 | DELTA INT | May 2014 (Q) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | NETCARE | 24/11/14 | 23/01/15 | 02/02/15 | ZAR 0.4800 | PNR FOODS | 24/11/14 | 23/01/15 | 02/02/15 | ZAR 1.5600 | PAN-AF | 21/11/14 | 28/11/14 | 19/12/14 | GBP 0.0081 | AECI 5.5%P | 21/11/14 | 05/12/14 | 15/12/14 | ZAR 0.4772 | TSO SUN | 20/11/14 | 05/12/14 | 15/12/14 | ZAR 0.2900 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | BRAIT PREF | 22/10/14 | 21/11/14 | 01/12/14 | ZAR 4.7470 | IVT PREF | 04/11/14 | 21/11/14 | 01/12/14 | ZAR 3.8739 | VODACOM | 10/11/14 | 21/11/14 | 01/12/14 | ZAR 3.7500 | DATATEC | 15/10/14 | 21/11/14 | 01/12/14 | ZAR 0.8800 | REBOSIS | 05/11/14 | 21/11/14 | 01/12/14 | ZAR 0.5095 |
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Upcoming AGMs** Code | Company Name | Date | Status | HYP | Hyprop Investments Ltd. | 25/11/2014 | Confirmed | HYPC | Hyprop Investments Ltd. | 25/11/2014 | Confirmed | SPG | Super Group Ltd. | 25/11/2014 | Confirmed | SPGP | Super Group Ltd. | 25/11/2014 | Confirmed | SPG001 | Super Group Ltd. | 25/11/2014 | Confirmed |
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