New Analysis: Summer Market Fluctuations
📶Decoding the S&P500: S&P 500’s Hollywood Stocks | What is a Good Win Loss Ratio? | Framework to Construct Your Portfolio | Alpha hedge Performance Review
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S&P 500 TRACKER
New Analysis: Summer Market Fluctuations
Since 1970, the S&P 500 has shown significant summer volatility, with an average of 7 days each year experiencing 1% drops.
This summer storm pattern reveals periods of intense market fluctuations that can unsettle even seasoned investors. However, the market also exhibits extended calm periods, sometimes lasting up to five months without a single 1% down day (source: Ritholtz Wealth Management, data via YCharts).
In the past 30 days, major S&P 500 companies like Nike NKE 0.00%↑ and Moderna MRNA 0.00%↑ have caused the higher market cap declines in the S&P 500. However, giants like Apple AAPL 0.00%↑ and Microsoft MSFT 0.00%↑ have shown substantial positive impact in the index.
Current Data: A Closer Look at the S&P 500’s Hollywood Stock Performance
In the first half of 2024, Hollywood stocks like Disney DIS 0.00%↑ and Fox Corp FOXA 0.00%↑experienced gains, while many peers saw declines.
Investors are wary, seeking proof that the media industry's downward trend can be reversed, especially amidst rising challenges like cord-cutting and AI advancements.
Companies are responding by cutting costs, exploring mergers, and focusing on streaming profitability to regain investor confidence. Paramount Global PARA 0.00%↑, Warner Bros Discovery WBD 0.00%↑ , and Comcast CMCSA 0.00%↑ are under intense scrutiny as they struggle with debt and market performance (source: hollywoodreporter).
The 30-day performance of the S&P 500 Index showed a gain of 2.1%. However, a significant number of stocks experienced substantial volatility, with changes ranging from -5.0% to +6.1%.
INSIDERS’ KNOWLEDGE HUB
What is a Good Win Loss Ratio?
Investors often find themselves asking, "What is a good win-loss ratio?" It's a crucial question, but the answer is more nuanced than one might think. The win-loss ratio, a simple measure comparing the number of winning positions to losing ones, can provide insight into a strategy's effectiveness. However, focusing solely on this ratio can be misleading without considering other essential factors.
Understanding the Win-Loss Ratio
The win-loss ratio is calculated by dividing the number of profitable positions by the number of unprofitable positions. For example, if you have 70 winning trades and 30 losing trades, your win-loss ratio is 70/30, or approximately 2.33.
While a high win-loss ratio might seem desirable, it doesn't tell the whole story. Profitability in investing is not solely about how many positions you win versus how many you lose; it's also about the size of those wins and losses.
Why Big Wins and Small Losses Matter
Achieving consistent profitability hinges on keeping losses small and letting wins run. This principle underpins many successful investing strategies. By ensuring that your average win significantly exceeds your average loss, you can afford to lose more often and still come out ahead.
Key Points for Maintaining a Favorable Win-Loss Ratio:
Discipline: Stick to your trading plan and avoid emotional decisions.
Risk Management: Always use Position Size quantitative metrics to limit potential losses.
Continuous Learning: Adapt to market conditions and refine your strategy.
Case Study: The Alpha Hedge Portfolio Win/Loss Ratio
The Alpha Hedge Portfolio has a Win/Loss Ratio of 53.6%. However, more important is the Profit Factor of 4.7:1, calculated by dividing total winning positions' profits by total positions' losses. This demonstrates the portfolio's strong performance and effectiveness in capturing profitable trades while minimizing losses.
Alpha Hedge Portfolio Performance Review
Sorry, Construct Your Investment Portfolio is Hard: But Here is the 5 Steps Framework
Don’t be fueled, investing is complex due to unpredictable investment behavior.
Investing involves considering how much money, expectations, and profit, which are interconnected. Here is My Framework:
Know Your Objective
Define investment capacity and required return.
Avoid taking unnecessary risks by aligning investments with specific goals.
Don’t Invest More Than You Can Afford to Lose
Ensure investment losses won't prevent future opportunities.
Balance the size of investments to mitigate risk.
Don’t Diversify Too Much
Avoid over-diversification to maintain meaningful investment impact.
High volatility often leads to increased correlation, reducing diversification benefits.
Take Risks You’re Appropriately Compensated For
Identify and manage idiosyncratic risks unique to small businesses.
Use structured deals to account for potential risks.
Remember that the World is More Correlated Than You Think
Prepare for correlated uptrends and downturns in market dislocations.
The Alpha Hedge Portfolio has demonstrated robust performance, delivering a monthly gain of 3.9%, contributing to a year-to-date increase of 25.0%. Over a span of 34 months, the portfolio has achieved an impressive total return of 47.2%, significantly outperforming the S&P 500's corresponding gain of 25.59%.
