Metric Performance
The last stock tool in our list is Metric Performance.
We have a powerful tool called ‘Metric Performance’ that lets you backtest 400+ metrics across different timeframes in the major indices. For our example, we will choose the Earnings upgrade 3M metric.
- Select the metric: We have chosen the ‘Earnings upgrade 3M’
- Set the date range. We have chosen a longer period (from 2014) to generate better quality results.
- Select the universe. We have chosen Nifty 500.
- Press Run.
- We also have an option for Position sizing, but we won’t get into it here.
We have shared an image above for your understanding.
Once you click on ‘Run’, stocks are sorted in ascending order and grouped into portfolios based on percentiles.
For example, Quintile 1 includes stocks in the 0–20 percentile range, while Quintile 5 includes those in the 80–100 percentile range. Each stock within a portfolio is given an equal weight.
Using our standard walk-forward framework, five portfolios are created each quarter by splitting stocks into quintiles. These portfolios are then rebalanced with new stocks, ensuring the portfolios remain up-to-date with the latest market trends and stock performance.
Let’s see what data tells us about earnings upgrades.
First, we will select a shorter timeframe (3Y).
[Note: In our case, the Quintile 5 portfolio is the one that contains stocks with the highest EPS upgrades in the last 3 months. Quintile 1 portfolio, on the other hand, contains stocks with the lowest EPS upgrades (and even downgrades) in the last 3 months.]
A whopping 78.35% against 22.97%. And if this doesn’t make it clear how strong this metric is, let’s change the timeframe to the Max. And relook at the data.
Can you believe it? A massive return of 682.44% as compared to the stocks with the lowest upgrades that generated just 226.52%.
You can now analyze it across different metrics and gain mastery in this tool. That’s it for our tools in Stock Analysis.
Let’s now look at the tools in ETF and Mutual Funds.