Changing stock prices on a daily basis results in fluctuations in the investment value of your portfolio. Rapid changes in the investment value of your smallcase would result from changes in the prices of stocks within that particular smallcase. Such smallcases are said to have high volatility. Every smallcase is categorized into one of three volatility buckets – Low Volatility, Medium Volatility and High Volatility.
How is Volatility calculated?
Volatility will be calculated based on live data only. This means that no backtested data is taken into consideration while calculating volatility.
Calculation of Volatility if the smallcase is less than 1 year old
- If the weight of Equities in the portfolio is less than 40%, the smallcase will be considered ‘Low Volatility’.
- If the weight of Equities in the portfolio is between 40% to 70%, the smallcase will be considered ‘Medium Volatility’.
- If the weight of Equities in the portfolio is greater than 70%, then the weight of large-cap stocks within the equities portion is taken into consideration. If the weight of large-cap stocks is more than 70%, the smallcase is considered as ‘Medium Volatility’. If the weight of large-cap stocks is less then 70%, the smallcase is considered as ‘High Volatility’.
Calculation for periods more than 1 year
Volatility would be calculated by comparing the average annual fluctuation of the smallcase with Nifty-50.
smallcases with significantly lower fluctuations than Nifty-50 will be categorized as ‘Low Volatility’. Similarly, smallcases with significantly higher fluctuations compared to Nifty-50 would be categorized as ‘High Volatility’.
In the table below, Volatility Ratio (VR) represents the average annual rolling standard deviation of the smallcase divided by the average annual rolling standard deviation of the Nifty-50 index, since the launch of the smallcase.
|Label||Volatility Ratio (VR)|
|High Volatility||VR >= 1.3|
|Low Volatility||VR < 0.8|
|Medium Volatility||0.8 <= VR < 1.3|