This is an important concept about volatility and liquidity which is a must need for trader’s arsenal –
Low Volatility –
Investors like low volatility. A stock that does up 10% a day also poses a chance of going down 20% in the next day. People are happy to make small consistent returns rather than big returns which has volatility.
IISL (People who main indexes like NIFTY) has already created a set of 30 stocks based on four parameters. Well, being investor’s choice, all of them has “Low Volatility” in them.
Based on these parameters these following indices are designed –
- NIFTY Alpha Low-Volatility 30
- NIFTY Quality Low-Volatility 30
- NIFTY Alpha Quality Low-Volatility 30
- NIFTY Alpha Quality Value Low-Volatility 30
Also, there are two more indices which give 50 and 100 stocks. Well, what a man will do with 50 stocks. One can choose as per their taste.
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 the 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.
- Jet Airways defers Q1 result announcement
Do you think Jet Airways will be a non-volatile stock for the coming months? Stocks are affected with short-term fundamental cues.
- Dalian iron ore rallies on strong Chinese steel margins, coke at 11-mth top
This news affects the entire steel stocks like Tata Steel, Jindal Steel.
So, there is a question of a time period where you simply might want to know what stocks didn’t make much sound in last 2 months let’s say for your purposes. You can get them from the sheet I created here.
Less Volatile for Intraday –
Intraday Volatility is related with VIX. The above answer sums up different scenarios in a detailed manner.
Stocks following the same pattern for a long time –
There are many interesting patterns in Indian Stock Market. Here is one involving Salman Khan.
Any stock that is in a sideways trend falls under this category.
Like – Infratel (60 Minutes timeframe)
Like – Jet Airways (Monthly timeframe)
So, one is following “the same pattern” since last month, one is following for years.
Couple days back, This stock emerged in news. Since its IPO, it is always going up and never seen a single red candle till now. If I was answering this question one month back, I would’ve added this – It always goes up. So it will go up.
What you are looking is Swing Trading in Low Volatility Stock. Just keep a stop loss in your trades! 🙂