Factor diagram


Investtech’s Factor diagram visualises the stock’s most important qualities. The more green, the more positive the stock is considered to be. If the stock is weak or quite weak, the diagram is red.


Factor diagram
Each factor is given a score on a scale from -100 to +100. A score above +50 is considered strong for this factor. Scores between 25 and 50 indicate quite strong, -25 to +25 neutral, between -25 and -50 quite weak and below -50 weak.

The stock shown in the diagram here is strong for factors Quantitative, Technical and Stability, quite weak for Insider and weak for factor Fundamental. The middle circle in the diagram represents neutral score and the outer circle maximally positive score.

One single element provides the total factor score for certain factors, while other factors are calculated from several element values. Access to information about each contributing element and the exact numerical score of each factor is available on subscription level Trader and above.

Mouseover is available on the chart pages, where moving your pointer across each factor brings up information about factor score and the underlying value calculations.

Technical

Technical shows the stock’s strength based on short, medium and long term technical analysis. The stronger the stock, the higher investor optimism is considered to be. According to Investtech’s research, technically positive stocks have developed well and outperformed other stocks.

The factor is calculated from Investtech’s automatic technical analysis in the short, medium and long term. RSI momentum is also used, where values above 70 are strongly positive, below 30 strongly negative and between 40 and 60 quite neutral.

Technical analyses are the absolute most important analyses on Investtech’s website. Read more about these analyses on our Help pages. You are also welcome to peruse research and statistics where we have studied how well the different technical signals performed in the past.

Quantitative

Quantitative measures the stock’s estimated future return compared to the other stocks in the market. The factor is calculated from the statistical return of stocks with similar quantitative characteristics. The stock’s trend status, support and resistance levels, price patterns, momentum and insider trades are used, and the score is adjusted for high or low volatility and liquidity.

The factor is calculated from signal statistics for Nordic stocks, presented in Investtech’s research reports on trends, support and resistance and insider trades. The same elements as shown in the Investtech research box on the chart page are included, but are often adjusted in accordance with the stock’s volatility and liquidity. In particular, stocks with extremely high or increasing volatility may have their score reduced due to the historically negative statistical development of such stocks.

Only stocks with an average daily turnover of at least 50.000 EUR are given a score. Lower turnover makes the factor uncertain and it’s then set to neutral score.

The factor is based on a ranking of stocks, such that the 10 per cent strongest stocks have a score above 80. The 25 per cent strongest stocks have a score above 50 and are classified as strong. Regardless of how negative or positive the stock market is, 25 per cent of stocks will always be quantitatively strong and 25 per cent quantitatively weak.

Insider

Insider is the stock’s assessment based on reported insider trades. When directors of the board, executives and other insiders who are required to report trades purchase stocks in their respective companies, it indicates that they believe in rising prices and that no immediate negative surprises are forthcoming. Insider analysis can be considered a simplified fundamental analysis.

The factor score is the same as the stock’s insider score, available for Norwegian, Swedish and Danish stocks. Read more about insider analysis here.

Stability

Stability is an assessment of the likely stability of the stock price. Stocks with high stability have historically had low price fluctuations, strong liquidity and been listed on the stock exchange for a long time. The risk of falling prices is low in such stocks, but the upside can be low as well. In other words, expect stable price development with only small changes. Stocks with low stability have high risk. It is risky to own and trade them, and they can both fall and rise a lot in a short period of time.

Three elements make up the calculation of stability: the stock’s volatility, measured by historical monthly price fluctuations, the stock’s liquidity, measured by historical daily turnover in local currency, and the stock’s duration as listed on the stock exchange.

Volatility is considered the most important factor and counts double towards the final score. Stocks with less than 10 per cent volatility get the highest stability value, while volatility above 40 per cent gives the lowest value. Volatility between approximately 17 and 25 per cent on a monthly basis gives a fairly neutral value.

Liquidity often correlates with the size of the company. Large companies tend to be more stable over time and easier to trade than smaller companies. High liquidity stocks, with liquidity above 10 million EUR, get the highest stability value, while those with liquidity below 100,000 EUR get the lowest value. Liquidity between approximately 100,000 and 1 million EUR get a quite neutral value.

Recently listed stocks are considered high risk, as they are often quite recently established companies in an early phase of development, which involves high uncertainty. Lowest value is assigned stocks with less than 1 year’s history on the stock exchange. Old companies that have been listed for 25 years or more, get the highest value. Neutral value is assigned companies that have been listed between approximately 6 and 12 years.

Fundamental

Fundamental describes the stock’s value based on accounting value and financial quality. The factor is calculated from stock price vs the company’s earnings, i.e. its P/E (price-to-earnings ratio) and its book value, i.e. P/B (price-to-book value ratio). High fundamental value often means low downside risk, while low fundamental value often indicates good growth opportunities and a large upside.

P/E below 10 gives maximally negative element value, while negative P/E or P/E above 200 give minimal value. P/E scores between 20 and 30 give quite neutral values. P/B below 1 gives max element value, while P/B above 20 gives minimal value. P/B values between 2.5 and 4.0 give quite neutral values.

The P/E and P/B elements are equally weighted in the total score of this factor.

Note that this factor measures the fundamental value of the stock, i.e. the equity of each stock and its earnings. The factor does not speak to growth qualities. Investors will often highly value growth and growth potential and thus pay more for such stocks compared to the companies’ current equity and profit. Thus, a stock’s growth quality will often be the opposite of its value quality.

Stocks with high growth potential will usually be found among the stocks with low fundamental score.

Stocks with a high Investtech Fundamental score have high fundamental value and are considered safer, more robust and better equipped to tolerate stock market unrest.

 

Four or five Factors

Factor diagrams are available for all Nordic stocks. Norwegian, Swedish and Danish stocks have factor diagrams with the five factors described above.


Factor diagram

Investtech does not have insider trade data for the Finnish market. The factor diagram for Finnish stocks, and for Investor subscribers, consists of the other four factors, less Insider score.

The stock shown in this diagram is strong on Technical and Stability, neutral on Quantitative and quite negative on Fundamental.

Investor subscribers have access to factor diagrams with these four factors. The Insider factor is not included. Note that fundamental key ratios are included in the factor diagram even for Investor subscribers, while a Trader subscription or higher is required for access to Fundamental details.

Trader subscribers have access to factor diagrams with all factors, including Insider for applicable markets. Professional subscriptions or higher are required for details and selection opportunites for insider trades.

 


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.

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