2a:T584,

The Alpha-Beta of stock market

By Mihir & Kartikeya

As a beginner investor, it may get very intimidating to decide where to put your hard earned money in.

One of the key things to remember: Risk and Return go hand in hand. Higher the risk, higher the return. Lower the risk; lower is the return.

Through this interactive visualisation we will try to understand how to quantify the Risk and Returns of the stock market.

Alpha is the measure of Return related to a stock. It's defined as excess return of a stock relative to its benchmark, calculated using 104 weekly price close points.

Beta is the measure of Risk related to a stock. It's a measure of a company's stock price volatility relative to the market.

2b:T728,vegaEmbed({ width:"600", height:"600", layer: [ { data: {values: n50stocks_data}, title: "What suits you best ? " , mark: {type:"circle", tooltip:true}, encoding: { x: {field: "alpha", type: "quantitative", axis: null}, y: {field: "beta", type: "quantitative", axis: null}, size: {value: "100"}, color: {field: "sector", type: "nominal"}, tooltip: [{field: "company"}, {field: "sector"}, {field: "alpha"}, {field: "beta"}], } }, { width: "600", height: "600", data: {values: quadrantlabel_data}, mark : "text", encoding: { x: {field: "alpha", type: "nominal", axis:null }, y: {field: "beta", type: "nominal", axis:null }, text: { field: "company", type: "N" }, } }, { data: {values: n50stocks_data }, mark: { type: "rule", color: "grey", }, encoding: { x: { field: "alpha", datum: "-40", type: "quantitative", axis: {labels: true} }, y: { field: "beta", datum: "1.1", title: "beta", titleX: "100", type: "quantitative", axis: {offset: "-300"}, }, x2: { field: "alpha", datum: "40"}, y2: { field: "beta",datum: "1.1", axis: {offset: "-300"},title: "beta", titleX: "100"}, }, }, { data: {values: [{}]}, mark: { type: "rule", color: "grey", }, encoding: { x: { datum: "0", type: "quantitative", title: "alpha", axis: {offset: "-350"} }, y: { datum: "0", type: "quantitative", title: "beta", titleX: "100" }, x2: {datum: "0", axis: {offset: "-350"}}, y2: {datum: "2.4", title: "beta", titleX: "100" } } }, ], config: { view: {stroke: null}, axis: {grid: false} } })2c:T559,vegaEmbed({ height: "450", width: "820", layer:[ { params: [ { name: "hover", select: { type: "point", on: "mouseover", nearest: true } }, { name: "widget", select: { type: "point", fields: ["Company"] }, bind: { input: "radio", options: ["IndusInd Bank", "Tata Motors", "Divi's Laboratory", "Coal India"], name: "Company" } } ], data: {values: company_data}, mark: {type: "area", interpolate: "natural"}, encoding:{ x:{field: "Date", type:"temporal"}, y:{field: "Percent_Vol", type:"quantitative", stack: null}, color:{ condition: { param: "hover", empty: false }, field: "Company", type:"nominal", //scale: {scheme: "category20b"} scale:{ range: ["#D1B5E5", "#9CDCED", "#ABE9DD", "#FAC9D1"]} }, opacity: { condition: { param: "widget", value: 1 }, value: 0} } }, { data: {values:nifty50_data}, mark: {type: "area", interpolate: "natural"}, encoding: { x:{field: "Date", type:"temporal"}, y:{field: "Percent_Vol", type:"quantitative", stack: null, title: "Volatility", axis:{labels: false, ticks: false}}, color: {value: "#A9A9A9"}, opacity: {value: "0.5"} } } ], config: { view: {stroke: null}, axis: {grid: false} } })2d:T556,vegaEmbed({ height: "450", width: "820", layer:[ { params: [ { name: "hover", select: { type: "point", on: "mouseover", nearest: true } }, { name: "widget", select: { type: "point", fields: ["Company"] }, bind: { input: "radio", options: ["IndusInd Bank", "Tata Motors", "Divi's Laboratory", "Coal India"], name: "Company" } } ], data: {values: company_data}, mark: {type: "area", interpolate: "natural"}, encoding:{ x:{field: "Date", type:"temporal"}, y:{field: "Percent_Ret", type:"quantitative", stack: null}, color:{ condition: { param: "hover", empty: false }, field: "Company", type:"nominal", //scale: {scheme: "category20b"} scale:{ range: ["#D1B5E5", "#9CDCED", "#ABE9DD", "#FAC9D1"]} }, opacity: { condition: { param: "widget", value: 1 }, value: 0} } }, { data: {values:nifty50_data}, mark: {type: "area", interpolate: "natural"}, encoding: { x:{field: "Date", type:"temporal"}, y:{field: "Percent_Ret", type:"quantitative", stack: null, title: "Returns", axis:{labels: false, ticks: false}}, color: {value: "#A9A9A9"}, opacity: {value: "0.5"} } } ], config: { view: {stroke: null}, axis: {grid: false} } })2e:T5ec,## Flow of visualisation - Introduction - 2 liners about What is stock market. - Focus on Beta value and Alpha value - Introduce Beta as **measure of the risk of a stock relative to the market trend** - Introduce Alpha as **measure of the returns relative to the market trend** - Validate Beta values - Visualisation to show market fluctuation during Covid 19 slump - Filter by Beta values: - **<1**: To show safer than the market - **=1**: To show at par with market trend - **>1**: To show riskier compared to the market - **Visualisation: Line graph** -**Interaction**: Hover to highlight stocks relative to market trend - Segmenting alpha-beta values on 2x2 matrix to show strategies for beginner retail investor: - x axis: alpha values - y axis: beta values - **Quadrants:** - Reference point/ Origin: **0,1** - First Quad: low Alpha - Low Beta: **Undesirable- May only give dividends at max** - Second Quad: Low Alpha - high Beta: **useful for Day trading** - Third Quad: High Alpha - High Beta: **Active trading: High risk appetite with High returns** - Fourth Quad: High Alpha - Low Beta: **Passive trading: Long term investments: Low risk with high returns** -**Visualisation: Scatter plot** -**Interaction**: Hover to show tooltip with CAGR value, Alpha and Beta -**Conclusion** - Show historic trend of stock market - Highlight Slumps - Show that slumps are small ripples, in general the market keeps growing2f:T443,## Patterns ### Data - Nifty 50 stock parameters - Company name - Sector - Market cap - PE - Closing value - Alpha - Beta ### Transform - Reorganizing the data - Reducing the number of sectors (from 16 to 9) ### Views - 2 Views - Beta values comparison against Nifty50 index - Depicting the volatility of the stock - 2 X 2 Scatterplot of alpha beta values - For making decisions which company's stocks to buy based on risk appetite ### Annotations - Beta values comparison - Close value of stocks (Y) vs Time - Legend - Line color denotes the volatility of stock (beta > 1 = Red, beta = 1 = Blue, beta < 1 = Green) - 2 X 2 Scatterplot - Alpha (X) vs beta (Y) to create a 4 quadrants depicting the risk appetite - Legend - Colour of circle representing the stocks ### Direct Interaction - Beta values comparison - Filter to select companies with varying beta values - Hover to reveal more information - 2 X 2 Scatterplot - Filter to select companies from different sectors - Hover to reveal more information30:T467,## User flow ### After landing on the page - user reads short definitions about Stock Market, Alpha and Beta - User moves onto the **first visualization:** - A line chart showing Nifty50 index trend for reference: - Plotting the stocks on a timeline: - Filter by beta values (<1, =1, >1): - Greyed out stocks - On hover, the stock highlights and the user can see the trend relative to index - Tooltip gives additional details: Name, Sector, Beta value - *This in turn is supposed to re-inforce the concept of Beta for the user* - User moves to the **second visualisation:** - pLotting same companies as above on alpah - beta scale - The Alpha-Beta values are divided into quadrants - Each Quadrant represents the opportunities based on the risk appetite of the user - Filter by Sector: User can view companies by sectors - The companies are distributed across quadrants - First: Low a and b - Second: Low a and high b - Third: High a and high b - Fourth: High b and low a 31:[] 29:{"title":"The Alpha-Beta of stock market","cells":[{"id":0,"value":"$2a","pinned":false,"hidden":false,"mode":"html"},{"id":22,"value":"vegaEmbed = require(\"vega-embed\")","pinned":false,"hidden":false,"mode":"ojs"},{"id":24,"value":"d3 = require(\"d3\")","pinned":false,"hidden":false,"mode":"ojs"},{"id":26,"value":"arquero = require(\"arquero\")","pinned":false,"hidden":false,"mode":"ojs"},{"id":28,"value":"n50stocks_link = \"https://docs.google.com/spreadsheets/d/e/2PACX-1vQbBIGSwAJMsVtki4Ex90DGcOTQxhSWHkbTUTj4GazYWVueNMq_Cm4YYdYhPGiQQpdcu07jPlS3UgC1/pub?gid=666508817&single=true&output=csv\"","pinned":false,"hidden":false,"mode":"ojs"},{"id":32,"value":"n50stocks_data = d3.csv(n50stocks_link)","pinned":false,"hidden":false,"mode":"ojs"},{"id":34,"value":"d3.csv(n50stocks_link, d3.autoType)","pinned":false,"hidden":false,"mode":"ojs"},{"id":76,"value":"quadrantlabel_link = \"https://docs.google.com/spreadsheets/d/e/2PACX-1vQbBIGSwAJMsVtki4Ex90DGcOTQxhSWHkbTUTj4GazYWVueNMq_Cm4YYdYhPGiQQpdcu07jPlS3UgC1/pub?gid=2028602513&single=true&output=csv\"","pinned":false,"hidden":false,"mode":"ojs"},{"id":78,"value":"quadrantlabel_data = d3.csv(quadrantlabel_link)","pinned":false,"hidden":false,"mode":"ojs"},{"id":86,"value":"quadrantlabel_table = d3.csv(quadrantlabel_link, d3.autoType)","pinned":false,"hidden":false,"mode":"ojs"},{"id":236,"value":"## Risk appetite for Nifty 50 stocks","pinned":true,"hidden":false,"mode":"md"},{"id":68,"value":"$2b","pinned":false,"hidden":false,"mode":"ojs"},{"id":150,"value":"company_link = \"https://docs.google.com/spreadsheets/d/e/2PACX-1vRZ4hiryfJsnJvwxi-YdL6SDflirP0KUlbA-YqcZPk08oHCoMTaChwTIuph9g91dYx2MbpPWMbp5dMG/pub?gid=2035510950&single=true&output=csv\"","pinned":false,"hidden":false,"mode":"ojs"},{"id":152,"value":"company_data = d3.csv(company_link)","pinned":false,"hidden":false,"mode":"ojs"},{"id":156,"value":"nifty50_link = \"https://docs.google.com/spreadsheets/d/e/2PACX-1vRZ4hiryfJsnJvwxi-YdL6SDflirP0KUlbA-YqcZPk08oHCoMTaChwTIuph9g91dYx2MbpPWMbp5dMG/pub?gid=2039368171&single=true&output=csv\"","pinned":false,"hidden":false,"mode":"ojs"},{"id":158,"value":"nifty50_data = d3.csv(nifty50_link)","pinned":false,"hidden":false,"mode":"ojs"},{"id":230,"value":"## Volatiltity of a stock from each quadrant (Beta Value)","pinned":false,"hidden":false,"mode":"md"},{"id":160,"value":"$2c","pinned":false,"hidden":false,"mode":"ojs"},{"id":233,"value":"## Returns on a stock from each quadrant (Alpha Value)","pinned":false,"hidden":false,"mode":"md"},{"id":177,"value":"$2d","pinned":false,"hidden":false,"mode":"ojs"},{"id":246,"value":"

The Process

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