What does the risk factor on the wikifolio details page indicate and how is it calculated?
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.
Notifications on the risk factor
Email alerts for wikifolios on the watchlist
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.
Display and warning in the trade area
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.
Details on the risk factor and the risk categories
The risk factor is recalculated daily and after regrouping. The highest value of the last 200 days is always displayed.
- "1 x" means the current portfolio has the same expected variation in performance (volatility) as an average Eurostoxx 50 share.
- Securities "below 1 x," for example, 0.5 x, mean that the wikifolio has half as high a volatility as an average Eurostoxx 50 share.
- Securities "greater than 1 x" indicate that the expected volatility of the wikifolios is higher than that of an average Eurostoxx 50 share. "2 x" means, for example, that the expected volatility is twice as high as that of an average Eurostoxx 50 share.
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 calculation of the risk factor
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.
Why are Eurostoxx 50 stocks used as a benchmark?
Since wikifolios have a strong focus on European values, the Eurostoxx 50 provides a good basis for comparison as a benchmark.