The risk factor indicates the risk of price fluctuations of the current notional reference portfolio (wikifolio). For this, the expected variation in performance (volatility) of wikifolios with stocks, ETPs and funds in the investment universe is compared with the average volatility of all Eurostoxx 50 stocks.
Registered users of wikifolio.com have the option of activating risk notifications for individual wikifolios on their watchlist. For this purpose, the desired notification limit which lies above the current risk factor is entered. If the limit is exceeded, an automatic notification is sent by email.
If a wikifolio trader plans to conduct a trade that is likely to increase the risk factor of his wikifolios, and thus possibly pushes the wikifolio to a higher risk category, a warning will be displayed in the order form. The displayed values are estimates and serve as orientation.
The risk factor is recalculated daily and after regrouping. The highest value of the last 200 days is always displayed.
Depending on the size of the risk factor, the key ratio is displayed in different colors. Currently, the value is green for wikifolios with a very low risk factor of less than 0.5 and light green for wikifolios with low risk up to 0.65. For wikifolios with medium risk and a risk factor between 0.65 and 0.8, the risk factor is yellow, above that to the limit of 1.0 orange and above 1.0 red.
wikifolio of wikifolios and wikifolios which have activated structured products in their investment universe are excluded from the calculation and have no risk factor.
Important: The risk factor takes into account the composition of a wikifolio at a given time relative to the European market. Other risks, such as the total market risk, are not taken into account in the code number.
The basis for the calculation of the risk factor are the daily closing prices for the individual values of the past two years.
The individual values in the current wikifolio, i.e. their performance over the last two years, are checked for similarity by means of covariances. The result is an expected fluctuation in the performance of the portfolio in its current composition.
This is set in relation to the expected fluctuation margin of an average Eurostoxx 50 share.
Should a value in the portfolio have a track record of less than 20 days, the missing data will be supplemented by the average covariance of the remaining stocks, ETFs and funds from the wikifolio.com investment universe.
Since wikifolios have a strong focus on European values, the Eurostoxx 50 provides a good basis for comparison as a benchmark.