CENTUM investors herd to book profits while the going is good
22 Jan, 201914 min read
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CENTUM ELECTRONICS LTD was among the worst performers today. It fell by -2.85% to close at 363.65. It's recent 5 day performance has been -3.7%, +0.09%, -0.41%, +0.24% and -1.76%.
CENTUM showed a bullish trend over the last 3 months. During this period CENTUM delivered +1.3% and saw a maximum drawdown of -18.91%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in CENTUM till volatility reduces and a clear trend emerges.
CENTUM has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 11 Jan, 2016 to 5 Sep, 2018. Over the last 3 years and 1 month, CENTUM underperformed the NIFTY-50 index on 56% days.
During the last three months CENTUM delivered losses on 56% days. However, it still managed to end this period in a profit. It's best return during this period (of +6.04%) was on Friday, 2 Nov, 2018. While it's worst loss in the same period (of -4.71%) was on Thursday, 15 Nov, 2018. The longest stort-term trend during this period was 6 losing days, which started on 27 Nov, 2018 and ended on 4 Dec, 2018. This bearish trend lost -10.81% of investor capital.
During the last year CENTUM had 3 profitable months and 9 loss making months. CENTUM returned profits in fewer months than NIFTY-50 index. CENTUM was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Jun 2018, returned -19.67% compared to -6.42% returned by NIFTY-50 index in Sep 2018. CENTUM had a longer winning streak of losing months than NIFTY-50 index. It went down in 4 straight months (from May 2018 to Aug 2018) during which period it delivered -40.11%. It is interesting to note that both CENTUM and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.
Money won't create success, the freedom to make it will.
-- Nelson Mandela
CENTUM is currently seeing overall fall in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant surge in CENTUM's volatility from 23 Oct, 2018 to 5 Dec, 2018. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.
Advanced/professional short-term investors should note that CENTUM has significant negative skewness in it's return distribution. This indicates that CENTUM is very risky for short-term investment and can significantly underperform for long durations.
NIFTY-50 index has more chance of extreme outcomes than CENTUM. Therefore, NIFTY-50 must receive a lower allocation than CENTUM in your portfolio. NIFTY-50 index usually has shorter drawdown period than CENTUM.
On a general note (since you are interested in CENTUM), two instruments that have delivered similar performance as CENTUM are PAPERPROD and SUNTV. They are suitable as good alternative investment candidates that can diversify your portfolio.
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