Report Date: 07/23/2010
Copyright © 2007-2010 c4cast.com, Inc.
All rights reserved.
Report Date: 07/23/2010
Copyright © 2007-2010 c4cast.com, Inc.
All rights reserved.
EconomicInvestor database updated: 07/23/2010
Data is updated at the end of each business week.
Getting Started » Open Your Toolbox » MacroRisk Profile
How risky are your investments? How do you know? Too many investment strategies focus on only one or two things that impact risk, and ignore everything else. Included in that "everything else" is the economy, which is usually responsible for over 80% of a stock, fund, or portfolio's change in price! Now, for the first time, you can discover exactly how The Economy Matters to your individual investments with our exclusive Eta Analysis.
The MacroRisk Profile Report lets you take advantage of this Eta Analysis for your own stocks, funds, and portfolios. This is the only place that you can discover how much "economic risk" - risk because of changes in the economy, as measured by our patented tools - your investments are exposed to, how much of their price variation is generally caused by the economy, and most importantly, exactly how your investment's economic risk is related to 18 specific variables that you can watch and track. EconomicInvestor's MacroRisk Profile is available only to subscribed users.
The first image displayed on the MacroRisk Profile page is an investment's Composite MacroRisk Index, or CMRI. This patented tool tells you how much economic risk your stock is exposed to. Some stocks only move a little bit when the economy changes, while others move a great deal. The higher the CMRI for your stock, fund, or portfolio, the more economic risk it has, and the more its price will tend to fluctuate as the economy changes. By keeping track of your investments' CMRIs, you can choose the level of risk that's right for you.
Next, the MacroRisk Profile page tells you how well the economy really explains your investment's changes in price. We've discovered that the economy is often responsible for determining over 80% of a stock's price variation. The rest is governed by company-specific details, such as actual decisions that the CEO makes, the perception of the company by others in the field, or whether, for instance, the company just won a major lawsuit. Of course, the total percentage of the stock's price that our model explains (called an "R2") is different from company to company and from index to index.
Price changes in the S&P 500, for instance, are caused almost entirely by the economy, while most companies' changes in stock prices are only mostly dependent on the economy. The higher the R2, the better our models will be able to explain your investments' price movement. (For comparison, many other models that claim to tell you the risk of an investment only have an R2 of 5%-15%.) By showing you how much of your stock, fund, or portfolio's price change is influenced by the economy, we let you decide how much other information you need to take into account.
Finally, you can use this report to discover your stock, fund, or portfolio's Eta Profile. This exclusive content shows how your investment's economic risk is tied to 18 "MacroRisk Factors" or variables that directly impact its performance. We discovered back in 1999 that of the thousands of economic and financial variables in existence, there are 18 that consistently have a major impact on most investments. These 18 MacroRisk Factors are the backbone of EconomicInvestor's Eta Analysis, and are used to generate an Eta Profile.
Your stock's Eta Profile tells you how a significant change in each individual MacroRisk Factor would tend to impact your stock's price. As you can see on this graph, there are 18 red bars in an Eta Profile, which we have named "Eta Measures." Each Eta Measure corresponds to one of our 18 MacroRisk Factors. The bigger the Eta Measure, the more your stock's price is likely to change when that Eta Measure's MacroRisk Factor changes significantly. A tall Eta Measure sitting on top of the middle line (for example, the FTSE 100 Measure on the far left of this Eta Profile) shows that a significant increase in that MacroRisk Factor would generally lead to a large increase in your stock's price. If the red bar is smaller, it means that the same increase in the MacroRisk Factor would generally lead to a smaller increase in your stock's price. On the other hand, if the red bar hangs down from the middle line, like you can see fourth from the right on the graph above, this signifies a "negative correlation" between the MacroRisk Factor and your stock's price. This means that if the value of this MacroRisk Factor goes down significantly, your stock's price will tend to rise. To illustrate, you can see in the graph above that Boeing (an aerospace company) will tend to do better when the unemployment rate falls, since it has a large, negative Eta Measure for the Unemployment Rate MacroRisk Factor. An investment's Eta Profile will evolve over time, since companies are constantly making decisions that alter exactly how they relate to the economy. Fortunately, we update our information every week, so you can always find out which MacroRisk Factors you need to keep an eye on for your stocks, funds, and portfolios.
The MacroRisk Profile is just one of EconomicInvestor's exclusive tools. For information on how the economy may be helping or hindering your stocks, funds, or portfolios right now, check out out Climate Rating Report.
Or, if you'd like, view a tutorial on how to generate a MacroRisk Profile.
Note: if you ran this report right now, the numbers displayed might be different. This is because changes in the economy affect your stocks. Fortunately, EconomicInvestor updates its data weekly to keep you well informed.