Key Metrics Used Throughout the Application
1D IMPACT - this is the one day change in price of the equity, measured as the change between the closing price the day of the event (4pm EST) and the closing price the day before (if the event occurred before 4pm). If the event happened after 4pm, the 1D impact measures the change in price of the equity between the closing prices on the day of the event and the day after. This the the event's impact.
Having this statistic enables you to forecast how a new event may affect the share price. To do this, you'll need to look at similar events with similar types of companies. You can also look at the AVG 1D Return.
Why not calculate this from the time of the alert?
In order to get a proper representation of how an event impacts a stock, we have to exclude our bias. That means we cannot erase the event's impact by our system's reaction time. Let's use an example to illustrate. Imagine an event occurs and the price of the equity moves 4% in total for the 1D Impact, but 1% of the move happened in the first 10mins after the event. If our system sent an alert 20 minutes after the event, we would have missed 1% of the return if we calculate the return from the time of the alert. If this happened across all of the events, we would create an average event impact that was erroneous because the metric would be biased by our system's response time. It would not reflect the event's impact accurately.
The same is true is the event impact only included intraday trading hours (930am-4pm EST). There is often overnight price movement associated with an event. Excluding this from the calculations biases the results. However, some users have expressed a desire to look at the event impact this way as well. If you are one of them, please tell us. We aggregate feedback to determine which features to prioritize on our product development timeline.
AVG 1D Return - This metric takes the average of all the individual event impacts. It's like looking at the average temperature for a month. It won't tell you one day was 110 degrees, but it gives an idea of how events tend to impact the stocks.
When you filter the events using the filters on the left (as shown above), this statistic will update, giving you insights into how a company's attributes affect the event's impact on a stock.
Day 2 Impact and above - this uses the same calculation (closing price to closing price) one day after the event. It's useful to see if an event that causes prices to go one way, reverses to go the other way in the days that follow. This helps plan your exit strategy.
The same calculation is used for Day 3, Day, and Day 5. Other calculations, like the 1week, 1 month, 3 month impacts are cumulative over that time period where changes are calculated from the last day to the first trading day of the period.
Cumulative Return - the sum of all the individual event impacts of all equities affected by the events in a scenario over the time period selected. As an example, two events occurring within a 3 month period with price movements of +10% and +5% would have a cumulative impact of +15%. The metric is there to help understand how the scenario, if invested in as a strategy where a trader buys at the event and sells at the next closing, would perform over time. It assumes trading at the moment of the event which is unlikely to occur, so it is there as a guide for the possible performance. Actual trading performance can be better or worse, as stocks often peak in price mid-day.
Today's Change - The change in the equity price from the open at 930am EST to the close at 4pm. If premarket, the metric will display yesterday's intraday change until 930am comes and the data updates. The data is on a 15min lag from actual market prices.
WIN RATE - the percentage of events whose 1 day stock prices changes moved in the expected direction of the scenario. For bullish scenarios, the expected direction is positive. For bearish scenarios, the expected direction is negative. A 85% win rate means across all the events over the period of time selected, 85% of the events traded as expected.
Why isn't it 100%?
Some days, the market is just plain bad. There can be major global events that affect the trading that day. And companies can report mixed news, with some positive events and some negative.
One more Thing...it's important to note the size of the event matters. Seriously. A large buyback will affect the stock more than a small one. The same is true for a dividend increase. Keep this in mind while trading and looking for events that are significant or out of the ordinary.
For example, a 2% dividend increase is a snoozer. But a 25% dividend increase is impressive, especially if the dividend is already substantial. Taking a dividend from a penny a share to two pennies isn't going to get any investor's blood pumping.
READ MORE: FULL GLOSSARY OF TERMINOLOGIES AND METRICS USED
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