Investtech.com

Risk

Risk shows which chance you take when investing in a stock. Stocks with a high risk have a high chance of giving a high procentual profit, and a high chance of giving a high procentual loss. On the Investtech site we look at two types of risk:

Volatility risk shows the risk related to the normal price movements for a specific stock. If the volatility risk is high, you know that the stock has large daily and monthly movements. By holding such stocks, the value may fluctuate a lot in the short term.
Volatility risk is calculated by looking at the average difference between the lowest and highest price in all 22-day-periods for the past 395 days (i.e. the medium term chart). This number you can find in the table below the chart, as "Volatility" in the "1 month" period.
The following qualifications are used:

1-months-volatility   From   To    Volatility risk
                        0%   10%    Low
                       10%   20%    Medium
                       20%   40%    High
                       40%          Extreme

Liquidity risk shows the risk related to how easy it is to execute trades in the stock. If the liquidity risk is high, there often is a large spread between the buyer and seller, and there are few and small lots being trades. By buying or selling such a stock, the value of your investment can fluctuate quite a lot, especially if you are buying a larger lot, or are in a hurry to buy or sell.
Liquidity risk is calculated by looking at the daily turnover for the last quarter, divided into the last 5 days, the previous 17 days and the previous 44 days. These numbers are derived from "Volatility" for "1 week", "1 month" and "1 Quarter" as shown in the table under the chart.
The following qualifications are used:

Average daily liquidity           Liquidity risk
above 1.00 million euro/dollar         Low
0.10-1.00 million euro/dollar          Medium
0.001-0.10 million euro/dollar         High
below 0.001 million euro/dollar        Extreme


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