Unlock the secrets of effective investment risk management with our step-by-step guide. In this video, we cover essential tasks to help you navigate and minimize risks in your investment portfolio:
Task 1: Introduction to Risk – Understand the fundamentals of investment risk.
Task 2: Monthly Returns and Standard Deviation – Learn how to calculate these key metrics.
Task 3: Calculating Beta – Measure the risk of an individual asset compared to the market.
Task 4: Treynor Ratio – Evaluate performance adjusted for market risk.
Task 5: Value at Risk (VaR) – Quantify potential losses in your portfolio.
Task 6: Graphing and Conclusion – Visualize your data and draw meaningful insights.
Whether you’re a beginner or a seasoned investor, this guide offers valuable insights to help you make informed decisions. Don’t forget to like, subscribe, and hit the notification bell for more financial insights!
: موثر سرمایہ کاری کے خطرات کو منظم کرنے کے رازوں سے پردہ اٹھائیں۔ اس ویڈیو میں، ہم آپ کو آپ کے سرمایہ کاری کے پورٹ فولیو میں خطرات کو کم کرنے اور ان کا تجزیہ کرنے کے ضروری مراحل سکھائیں گے:
ٹاسک 1: خطرے کا تعارف – سرمایہ کاری کے خطرات کی بنیادی باتوں کو سمجھیں۔
ٹاسک 2: ماہانہ منافع اور سٹینڈرڈ ڈیوی ایشن – ان اہم پیمائشوں کا حساب لگانا سیکھیں۔
ٹاسک 3: بیٹا کا حساب لگانا – ایک انفرادی اثاثے کے خطرے کو مارکیٹ کے مقابلے میں ماپیں۔
ٹاسک 4: ٹریونر ریشو – مارکیٹ کے خطرے کو مدنظر رکھتے ہوئے کارکردگی کا جائزہ لیں۔
ٹاسک 5: ویلیو ایٹ رسک (VaR) – اپنے پورٹ فولیو میں ممکنہ نقصانات کا اندازہ لگائیں۔
ٹاسک 6: گرافنگ اور نتیجہ – اپنے ڈیٹا کو گراف میں دکھائیں اور مفید نتائج اخذ کریں۔
چاہے آپ ایک نئے سرمایہ کار ہیں یا تجربہ کار، یہ گائیڈ آپ کی مدد کرے گا کہ آپ صحیح فیصلے کریں۔ ویڈیو کو لائک، سبسکرائب اور نوٹیفیکیشن بیل دبانا مت بھولیں تاکہ آپ مزید مالی معلومات حاصل کر سکیں! https://youtu.be/JB8HpP8qpa0
Task 1: Introduction to Risk – Understand the fundamentals of investment risk.
Task 2: Monthly Returns and Standard Deviation – Learn how to calculate these key metrics.
Task 3: Calculating Beta – Measure the risk of an individual asset compared to the market.
Task 4: Treynor Ratio – Evaluate performance adjusted for market risk.
Task 5: Value at Risk (VaR) – Quantify potential losses in your portfolio.
Task 6: Graphing and Conclusion – Visualize your data and draw meaningful insights.
Whether you’re a beginner or a seasoned investor, this guide offers valuable insights to help you make informed decisions. Don’t forget to like, subscribe, and hit the notification bell for more financial insights!
: موثر سرمایہ کاری کے خطرات کو منظم کرنے کے رازوں سے پردہ اٹھائیں۔ اس ویڈیو میں، ہم آپ کو آپ کے سرمایہ کاری کے پورٹ فولیو میں خطرات کو کم کرنے اور ان کا تجزیہ کرنے کے ضروری مراحل سکھائیں گے:
ٹاسک 1: خطرے کا تعارف – سرمایہ کاری کے خطرات کی بنیادی باتوں کو سمجھیں۔
ٹاسک 2: ماہانہ منافع اور سٹینڈرڈ ڈیوی ایشن – ان اہم پیمائشوں کا حساب لگانا سیکھیں۔
ٹاسک 3: بیٹا کا حساب لگانا – ایک انفرادی اثاثے کے خطرے کو مارکیٹ کے مقابلے میں ماپیں۔
ٹاسک 4: ٹریونر ریشو – مارکیٹ کے خطرے کو مدنظر رکھتے ہوئے کارکردگی کا جائزہ لیں۔
ٹاسک 5: ویلیو ایٹ رسک (VaR) – اپنے پورٹ فولیو میں ممکنہ نقصانات کا اندازہ لگائیں۔
ٹاسک 6: گرافنگ اور نتیجہ – اپنے ڈیٹا کو گراف میں دکھائیں اور مفید نتائج اخذ کریں۔
چاہے آپ ایک نئے سرمایہ کار ہیں یا تجربہ کار، یہ گائیڈ آپ کی مدد کرے گا کہ آپ صحیح فیصلے کریں۔ ویڈیو کو لائک، سبسکرائب اور نوٹیفیکیشن بیل دبانا مت بھولیں تاکہ آپ مزید مالی معلومات حاصل کر سکیں! https://youtu.be/JB8HpP8qpa0
Category
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LearningTranscript
00:00In today's video, I will tell you about investment risk management, what is risk, how to know
00:10monthly risk or standard deviation of a stock, how to know monthly return or standard deviation,
00:18how to calculate beta, then I will tell you about trainer ratio, how to calculate it,
00:27then I will tell you about value at risk calculation and in the end I will do its graph and conclusion.
00:36So first of all, risk. Risk means how much risk is there in the money we are investing,
00:46that the purpose for which we are investing, whether that purpose will be achieved or not.
00:52For example, we have invested Rs. 100,000 in the bank and the bank says that after one year you will get Rs. 1,10,000.
01:01So we want to check whether we will get Rs. 1,10,000, it can be more or less.
01:10For example, we had invested for Rs. 1,10,000 but we get Rs. 1,05,000.
01:17So we have a risk of Rs. 5,000.
01:20Whatever we want, how much difference will it make, this is the risk.
01:26So let's go to the asset sheet for its calculation.
01:34I have already downloaded the data, I have data of 5 stocks.
01:39And this data is of Facebook, Amazon, Apple, Netflix and Google.
01:46And this data has been taken on a daily basis for the whole year 2014.
01:52And with this, we have taken the data of SBX Standard & Poor's as a benchmark.
02:00So first of all, we will calculate the daily return.
02:05For that, I select all of them and paste it here.
02:13After this, the return is obtained from the second day.
02:18The reason for this is that we have to compare with the first day.
02:22We will not get the return on the first day.
02:24So we will take the return of the second day.
02:27So we will put its formula as equal to.
02:32And today's return means today's return.
02:37We will divide it by yesterday's return and make it minus 1.
02:43So we got the return of Facebook.
02:48I will drag it, so we will get the return of all the stocks.
02:53And then I will double click it, so all the returns will come down completely.
02:59From here, we delete the last one.
03:03So we have all the returns.
03:07I will select all of them.
03:17After selecting, we will change it in percentage.
03:20And after the point in percentage, we will keep two values.
03:26So this is our daily return.
03:30After this, we will go to the calculations.
03:35In which we had monthly return and standard deviation.
03:40So we come to this task.
03:42So we will calculate the monthly return.
03:47For that, we will put the formula of the average.
03:52After this, we will go to the data.
03:56I will select all the data of Facebook and enter it.
04:00So this is our daily return.
04:04If we want to change it in monthly, then we will add a little in its formula.
04:08We will do plus 1.
04:11I will put brackets here.
04:13After this, I will take power.
04:1621 minus 1
04:21So this 21 is our working day in a month.
04:26If I enter it, then we have the monthly return.
04:30I will drag it.
04:34So we have the monthly return of all the stocks.
04:38After this, we will calculate the standard deviation.
04:42For standard deviation, we will put the formula of standard deviation.
04:48After this, we will select all the data of Facebook and enter it.
04:56So this is our daily return.
05:02If we want to change it in monthly, then we will multiply it.
05:07We will take the square root of 21.
05:12So this is our standard deviation on a monthly basis.
05:16If we drag it, then we have the monthly standard deviation.
05:21Now let's calculate the monthly return of the portfolio.
05:25If we do an equal weighted portfolio, then we have 5 stocks.
05:29So we will get 20-20% in all.
05:32So we will multiply it with 0.20.
05:42Plus we will do 0.20.
05:46And multiply it with the second stock.
05:49Plus we will do 0.20.
05:53And multiply it with the third stock.
05:57Plus again we will take 0.20.
06:01This is the weight of each stock.
06:04We will multiply it with the return of Netflix.
06:08Plus we will do 0.20.
06:17And multiply it with Google stock.
06:21So this is the return of all the stocks.
06:25And this is the return of the portfolio.
06:28Let's drag it.
06:30So this is the return of the portfolio.
06:33So this is the standard deviation of the point stock.
06:37So this is not a simple calculation.
06:40We will see it later.
06:42I am giving it blank.
06:44Now we have to calculate the beta.
06:48To calculate the beta, we have 2-3 ways.
06:56I will put the formula for beta here.
06:59I will put the formula for covariance.
07:01And the formula for NKVAR.
07:03For example, we will have this.
07:09I am putting the formula for beta.
07:11I will put the formula for covariance.
07:18We will multiply the stock.
07:22We will take the covar of the stock.
07:25SPX.
07:27And then we will divide it.
07:29We will take the bar of SPX.
07:34So we will get the beta.
07:38I am putting the formula for it.
07:41We will take the covar.
07:47And we will take the stock of Facebook.
07:56We will take the stock of Facebook.
07:59And we will compare it with the returns of Markit S&P.
08:09After selecting it, we will select it.
08:12And we will do CTRL F4.
08:14Because it is fixed for all the stocks.
08:16After that we will divide it.
08:19We will take the bar with the bar.
08:23And then the S&P.
08:25Markit is after it.
08:28So this will come.
08:31And this will also be fixed.
08:33So I fix it with F4.
08:36So it will not change anywhere.
08:39Sorry.
08:45So we got this.
08:47We corrected the formula automatically.
08:49We got the beta of Facebook.
08:53We will drag it.
08:57You can check it.
08:59We have all the stocks.
09:01Because we don't have the data of it.
09:03So I will skip it.
09:06So we have all the beta of all the stocks.
09:11If you want to see the beta,
09:15Facebook is less aggressive than Markit.
09:17If there is a 100% change in Markit,
09:20then there will be a 87% change in it.
09:24Similarly, Netflix's beta is aggressive.
09:27If there is a 1% change in Markit,
09:30then there will be a 1.10% change in it.
09:34And Amazon is almost similar to Markit.
09:38So we have the beta of Amazon and all the other stocks.
09:46After this, we will write the trainer ratio.
09:50So the formula for trainer ratio is
09:53trainer ratio
10:03I will write the formula so that it is not difficult for you to understand.
10:07So it will be
10:09monthly return
10:11minus
10:13risk free rate
10:17We will minus this.
10:21And we will divide it with beta.
10:25So we use beta in this.
10:29In the Sharpe ratio, we use standard deviation.
10:33But we use beta in this.
10:35So with beta, we get
10:37the return on the basis of the stock movement with Markit.
10:43And our calculations come.
10:47And it gets closer to the actual return.
10:50So now the risk free rate of 10 years
10:56is 0.19% monthly.
11:10So this 10 years is the risk free rate.
11:13Now we calculate the trainer ratio.
11:16So the monthly return is
11:20minus the risk free rate.
11:24And the risk free rate is the same in all.
11:28So we will fix it.
11:32And then we will divide it with beta.
11:39So this is our ratio.
11:44This is our trainer ratio.
11:48This is the trainer ratio of all stocks.
11:52So this is the trainer ratio of all stocks.
11:56And we can see that the trainer ratio of Google is the lowest.
12:00This means that the value of risk in this
12:03is the lowest.
12:05The other stocks have a high chance of variation.
12:09Now we calculate the VAR.
12:11So let me explain it to you first.
12:14If the return of the stock is a normal distribution.
12:18If the distribution is normal.
12:20So in such a situation,
12:22we have a bell-shaped curve.
12:26And the average return comes here.
12:30The average of all returns will come here.
12:33And this will be written in three parts.
12:35That we will minus the strength deviation once from the return.
12:38Minus twice and minus three times.
12:41So if we minus once,
12:43that is, if we minus the strength deviation from the return,
12:46or if we minus the strength deviation from the return,
12:50then our 68% falls in it.
12:53That is, there is a 68% chance that our return will be between these two values.
12:59That is, by minusing the strength deviation once.
13:03And if we minus the strength deviation twice,
13:07that is, by multiplying by 2 and minusing from the return,
13:12then our 95.45% will fall between these two values.
13:18That is, our return will come between these two blue values.
13:23And if we minus it three times,
13:26that is, if we minus our return three times,
13:30three multiplied by the strength deviation,
13:32then our return will fall by 99.73%.
13:36That is, our return will fall between these two values.
13:39That is, whatever return will come, whatever value will come,
13:42it will fall between them.
13:44So now we do calculations,
13:46then you will understand more easily.
13:48We go to the second sheet,
13:50in this portfolio sheet.
13:52So in this, we calculate it.
13:55More at 95%.
13:58So what we have to do is,
14:00this return is our monthly return.
14:03We have to minus 2 multiplied by the strength deviation.
14:07That is, we will minus it twice.
14:09So we have 2 times return.
14:13That is, in our return,
14:16this much percent variation can come.
14:19And if we,
14:21it can be in both plus and minus.
14:24So this much percent variation can come.
14:27And if we take it to 99%,
14:30so what we will do for that,
14:32we will take return,
14:34and from this we will minus
14:403 times the strength deviation.
14:44And we will drag it.
14:47So this will come to us.
14:49That is, the variations in our return can be like this.
14:54Now we calculate the portfolio first,
14:57and then we see how much is coming,
15:00and the return ratio.
15:02So for that, I come here,
15:04and first we will calculate the portfolio.
15:07I write the portfolio here.
15:11And for the portfolio,
15:13I copy the simple formula written here.
15:15I copy it.
15:17After copying, I will paste it here.
15:20So it will take all the values by itself.
15:23Now I drag it after this.
15:26So we have all this daily.
15:29Then the percent deviation came.
15:32Now I have already dragged it here.
15:35So we got its average.
15:38After this, if we take its average,
15:41then we get the strength deviation.
15:44We calculate the return ratio.
15:47I will drag it on the expression, so it will come.
15:50After this, we needed beta for it.
15:55So first we drag it on beta.
15:59So this came to us.
16:01Its return ratio has come.
16:03After this, we drag it.
16:08So this is coming to us.
16:11We keep it.
16:13So this has come to us.
16:16Now we did not calculate the strength deviation,
16:18so we drag the strength deviation,
16:21so we get the strength deviation.
16:23So this is the strength deviation of our portfolio.
16:27So you can see that the value at risk of all stocks is 0.23.
16:33Similarly, it also has 0.23 margin.
16:36Apple has 18 points.
16:38Netflix has 32.
16:40And Google has 18.
16:42While the strength deviation of our portfolio is 17.
16:48That means the maximum value at risk is 17%.
16:53And if we check above,
16:56then the return is also high.
16:58So this is also an advantage of the portfolio.
17:01Now let's go to diversification.
17:04Now let's see the trainer ratio through the graph.
17:08And before that, let's check the other values.
17:10So for that, we will make a graph.
17:12I will select all the values.
17:14And first we will make a trainer ratio graph.
17:17I will insert it.
17:19And we will check the recommended chart.
17:21So we got this.
17:23The trainer ratio graph.
17:25We got this graph.
17:27Let's drag it here.
17:30And a little bit from here.
17:34Because we are not looking with S&P,
17:37and we have not calculated the trainer ratio.
17:40I will finish it from here.
17:42I will press OK.
17:44So we got the trainer ratio.
17:48And after that, I will make a graph of the value at risk.
17:55For that, we will select all the values.
17:58After that, we will select them.
18:01After selecting, we will go to Insert.
18:04And we will go to Recommended Charts.
18:06So we got this chart.
18:08I will press OK.
18:10After pressing OK,
18:13I will change the name.
18:17I will change it to value at risk.
18:19Value at risk.
18:25So we got this chart.
18:27And we can see that the maximum risk is of Netflix.
18:32And it is coming here.
18:34And if we see others,
18:36the portfolio risk is coming here.
18:40We can make it better.
18:42If we draw a line here.
18:44Anyway, we have calculated the trainer ratio and value at risk.
18:51So value at risk tells us how much maximum risk we can have.
18:56So if we invest in the portfolio of Pointstar,
19:00then if the maximum loss is more than 3 times our expectation,
19:06then the maximum loss will be 17%.
19:11So this was today's video.
19:13I hope you liked it.
19:15Thank you. Allah Hafiz.