I always tend to calculate the indicators after learning their concepts. This not only gives me a leverage of understanding but also I end up tuning my own indicators.

Beta

Beta is a coefficient is a measure of its volatility over time compared to a market benchmark. Market benchmark has a beta of 1. Shortly, if volatility is 1.5 it means it is 50% more volatile than market. So for US Stocks Market benchmark is S&P 500.

What is the market benchmark for India? There are two major market benchmarks here – NSE and SENSEX.

When I looking for a calculated version of it, I found a suggestion and got it on Reuter’s website. Here is beta of Asian Paints.

In the site ‘ASPN.NS’ signifies NSE listed Asian Paints and likely ‘ASPN.BO’ signifies BSE. But both betas are same.

Also it is written nowhere that what is the time period they have chosen for calculating the beta. What is the standard timeframe? Nowhere in the internet also. So it was useless speculation to me. But I was searching for beta for my stock CUPID.

I got served with coconuts! I read it is easy to calculate beta in Google Finance. Sounds scary? Ha-ha. Create a google sheet. Let’s say type –

GOOGLEFINANCE(“GOOG”, “price”, DATE(2014,1,1), DATE(2014,12,31), “DAILY”)

That will do it.

The attribute beta was supposed to work this way

GOOGLEFINANCE(“CUPID”, “beta”)

But well It always shows #N/A. where every other single attribute was working like a charm. It’s like I was getting mocked. But wait, then I thought it is totally wrong!

Even it is shown #N/A in Google Finance’s documentation!!

For the attribute beta, there is a parameter. For how many years you are taking the data? Since the time of the stock IPO? It doesn’t make any sense at all in such case.

I choose it to be last 12 months to be precise. It works better and optimized way than if I took 3 years’ data which many traders prefer. My estimations are always data driven so yes, I have tested and back-tested few strategies involving beta and found 12 months’ data is the best.

Then I came across another shitty thing from Google Finance. Some day’s data are missing for the stocks. You can see the problem here in my Google sheet. (BOM:530843 is Cupid)

So, well it happens when the stock was not listed in either of NSE or BSE. So you need to work around in that cases.

If you do not want to calculate then how you will use it in your strategy considering there are other factors which you can leverage when you calculate it yourself. Like I did for time frame. Calculating an indicator, yourself gives a great understanding and faithfulness towards it.

I optimized it further.

Look at the Daily Change field. That doesn’t come from Google Finance. I did a conditional statement – if there is something in the date field then only show this field and calculate.

Now I achieved the position where I have to just type the stock’s name and the beta will come out.

Both Betas. Taking Nifty and Sensex as their Market benchmark. In case you need the beta’s formula –

Here is my Google sheet – Beta Calculation V2

You can make a clone to your Google Drive. It works like a charm. If you see any mistake, Give me a shout-out.

Portfolio Beta

When the surgical strike happened this year in Kashmir on 29th Sep 2016, the next day was black Friday for me. I got my first losing streak. My portfolio tanked by huge drawdown, the beta indicator came into my mind.  I developed my own indicator which is called Portfolio Beta.

I will tell how to do it to make you uneasy rather than sharing that indicator and I will certainly love to help if you stuck anywhere doing so.

Here is how it works

You need to put which stock you have bought and how many shares. It shows beta of your portfolio by taking weighted value.

Let me explain in layman’s term – As per last sheet you see PC Jewellers right?

Suppose you buy 10 PC Jewellers stock and 10 Cupid stock and 1 DHFL stock then it will make a stock named Portfolio whose value is 10 PC Jewellers + 10 Cupid + 1 DHFL and whose daily change I leave up to you.

This is what I consider in my strategy of designing in some of my fundamental portfolios of which I deal with very large volume.

Mathematically, in my strategy, probability of getting -5% drawdown is 12% which happened at the time of demonetization few days ago. I still have that screenshot.

If I didn’t know how to calculate beta, I’d have tanked a hefty drawdown.