Sensitivity index for stock selection

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Old 29th September 2004, 02:11 PM
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Default Sensitivity index for stock selection



These are extracts from the book Maggie and Edwards which seem relevant and interesting for beginners:-

"The indexes are relative. They show that stocks with a high sensitivity index shall move much faster in either Bull or Bear markets than stocks with low indices and about how much faster relative to other stocks. If the market goes up by 10%, the stock shall move up by 25% or vice-versa."

"This is also called sensitivity index. Two stocks may have the same average(64) rise but the range of one stock maybe 12.5(58.5-71) points and another maybe 71 points(28.5-100). "

The two examples taken here are from the food and liquor industry. Their swing habits(sensitivity index) are drastically different. Traderji, should they compared like this-should not one take examples from the same industry. ? These are the figures given for sensitivity indes:-

Strocks with sensitivity index -50%-100% extremely conservative
100-150% speculative
150% and above highly speculative
Is this true?
How does one caculate the sensitivity index of a stock. The book is not clear on that

"In order to be in a position to make a profit, there should be a probability of 15% movement in the stock".- Time frame is not mentioned- is this irrespective of the time frame?

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