We have just this morning released a suite of new features to the Stockopedia site - including the RiskRatings and the StockRank Styles.  I will be explaining these features in an extensive webinar at 1pm today (Thursday 4th May) - (Replay link is here).  The following piece is the copy from our RiskRatings Ebook which can be downloaded for iPad, Kindle, PDF or read online here.  I will be publishing another post about the StockRank styles in due course.


The RiskRatings are Stockopedia’s classification of the market volatility of every company’s share price. We have designed the RiskRatings to be both a useful predictive measure of future volatility, but also an easy to use measure for accessing the “low volatility anomaly” - the unusual fact in equities, that lower volatility securities tend to outperform high volatility securities over the long term.

The five classifications (from least to most volatile) are Conservative, Balanced, Adventurous, Speculative and Highly Speculative. At any time 10% of the market will be classified as Conservative, 15% Balanced, 20% Adventurous, 25% Speculative and 30% Highly Speculative.

In general, larger, more predictable and more profitable companies (such as Microsoft or Unilever) tend to be classified as Conservative, while younger, news driven, early revenue companies (such as Snap Inc or Sirius Minerals) will be classified as Speculative.

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Volatility is the most common measure of risk used in quantitative finance to assess risk adjusted returns. The use of volatility as “risk” is somewhat controversial, and criticised by many value investors. The common complaint is that "risk is not volatility, it is the likelihood of capital loss".

But modern portfolio theory, and most private investors, more broadly define Risk as the possibility of upside gain as well as downside loss. While value investors have struggled to quantify the likelihood of capital loss, Quantitative Investors have proven that price volatility is one of the best predictors of future upside and downside financial risk.

While the RiskRating is the essential rule of thumb for this purpose, we do recommend using the full suite of financial indicators available on Stockopedia to measure standard financial risks - including Bankruptcy Risk, Earnings Manipulation Risk and other Quality factors.

Risk and Return - theory vs practice

Most investors believe in the theory that…

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